Savaria Corporation (SIS) Earnings Call Transcript & Summary

Good morning. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to Savaria Corporation's Q4 2024 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 March 5, 2025, with respect to its Q4 2024 results. Thank you. Mr. Bourassa, you may begin your conference.

Thank you, Sarah, and good morning, everyone. So today, I will start with a small recap of our Q4 and 2024 results, then Steve will update us on financial, JP on Savaria One, and then we'll do a small Q&A session. First, I need to say that I'm very proud of our Q4 and 2024 results as they were exactly in line, especially on EBITDA, with our expectation during this transformation and they show again that we are stable at this fourth good quarter in a row. So thank you to all the team of Savaria. Some of the key highlights of Q4 and last year. First, a very good performance on the Patient Care in the fourth quarter. It's the best quarter ever at 23.1% of EBITDA, so good job to the team. Good growth of 20%. Every quarter telling me it's coming, it's coming, it's coming but a very good fourth quarter. For sure, in 2025, we'll prefer to be a bit more stable each quarter but a good end of the year. And it shows again that we have the right structure to do $50 million of sales and more and it falls at the bottom line. So good job. In North America, a good year, 8.4% of growth during the year. Yes, in Q4 was more flat but a very strong Q1, Q2, Q3. And again, we have worked very much in 2024 to improve our operation so that we can take more volume in the future. So quite happy with the change. A solid performance from each division from Europe to North America to Patient Care to improve our EBITDA of 3.1% for the full corporation so that's a good achievement. Our debt ratio of 1.63, so again, we have improved a lot of working capital, we have improved EBITDA and that leave us some available fund of $242 million, which put us in a good position for acquisition or investment, especially when there's a bit of turbulence, that can be good to have a good balance sheet. The growth in 2025, for sure, is going to be a key focus in Savaria One and R&D. Right now, we are launching the through-the-floor lift, LU/LA elevator that we call. It's going to be sell worldwide, it's code-compliant and we are starting manufacturing this week so I think in the next few weeks, we'll be able to ramp up the sales. So quite positive about the organic growth in the future on that. And I think everybody at Savaria know that I really like this product. So today, we'll try to be proactive and talk right away about tariffs before we come in questions in the Q&A. So this is very fresh and it happened officially last week -- excuse me, this week. The rule is still not super clear what's happening one side to the other. Is it going to affect us? On the very short term, yes. But let's reassure, we are proactive. We have done some good planning in the last few weeks and we're going to act quickly on this. Our operation and supply chain has always been a strength at Savaria, and I think we have demonstrated in the last 5 years from COVID to supply chain issue with containers, inflation. So I'm feeling quite good about it. And through the Savaria One, I think our team just got better so I think we're ready to overcome those challenges. First, in the coming week, there will be some small price increase to our customer, dealer that we do in a fair way as our dealer has always been a strength of Savaria for the last 35 years. And it will continue under the family leadership. We take care of our customer and employee are we are there for the long term. Second, we are very lucky we have some footprint already in the U.S. We have two factories, one in Greenville, one in St. Louis, and the one in Greenville has 60,000 square foot available empty that we can use to make some assembly lines on finished products. So definitely, we are going to put that in exercise to use this extra capacity and we can even expand the building because we own a big land in Greenville. Fourth, as I said earlier, we have the right balance sheet with $242 million available so we can make investments to go through the small challenges or opportunity that might come because opportunity can come and the kind of turbulence a little bit. And finally, you saw that we revised our guidance for the 2025 year. We knew that with the sale of the car division last year, that we didn't replace the sales last year in 2024, we choose to go for EBITDA in Europe over sales growth. So all this to say that that's why we have revised the volume to $925 million of sales and we are feeling good about that. And the EBITDA, we have put a bracket from 17% to 20% because on the short term, we need to readjust on the tariff but I'm feeling comfortable. The target still we want to make 20% but we need to be realistic. That's why we put a bracket. And as you know, just to finish, we know we are a very agile organization. We can overcome some challenges. I think we have the right team, the right employees. So again, thanks for all your effort that you did last year and thanks for your efforts that you do in 2025. I'm sure we'll get through these challenges together. Steve, some update on financial, please.

Yes. Thanks, Sebastien, and good morning to everyone on the call. I'm excited to share with you today some remarks and highlights regarding our Q4 and full year 2024 financial metrics. So the key highlights for the quarter include, firstly, as Sebastien mentioned, organic growth of 20.6% in Patient Care; consolidated gross margin of 37.7%, which is an increase of 340 basis points versus last year, mainly due to improvements generated under Savaria One; adjusted EBITDA margin of 19.2%, which marks now three quarters in a row of margin at 19% at least or above; strong cash flow and working capital performance, resulting in a reduction of our leverage ratio to -- our leverage ratio of net debt to adjusted EBITDA to 1.63, as Sebastien noted, at the end of the year. Starting with consolidated revenues for the quarter, we generated revenues of $223.3 million, which is an increase of 3% versus last year. That growth is driven by 0.9% organic growth and a positive foreign exchange impact of 2.1%. As previously stated, we had very strong organic growth in our Patient Care segment of 20.6% due to increased medical bed frame sales and mattress revenues as well as ceiling lift packages from increased projects closing in the long-term care markets. Our Accessibility segment had a contraction of 1.9% in the quarter, driven by a 7.8% contraction in Europe and flat growth in North America. Europe continues to be focused on higher-margin sales, and we expect to see a return to positive growth in 2025 as we deliver on our customer win-back strategy as well as introduce new products to the market. North America had growth of 8.4% for all of 2024, and we saw very strong growth in Q1 through Q3, which was tempered in Q4. The North American backlog remains strong as we look forward to continued sales growth in 2025 aided by the introduction of the LU/LA, as Sebastien mentioned, which is the new through-the-floor lift as well as continuing to drive sales of the Matot-branded dumbwaiters and material lifts, which we acquired earlier in 2024. On a full year basis, the lost revenue from the divestments of Van-Action and Freedom, which were our manufacturing vehicle divisions, was greater than the benefit that Matot brought to us in 2024, hence driving the overall negative net acquisition divestment impact of a minus 1.4% for the year. Looking now at gross margins. Our consolidated gross margin for the quarter was 37.7% and 37.1% for the full year. As previously stated, this is a significant improvement over prior year as we continue to see benefits under the Savaria One program in all of our segments. The main drivers of the improvements are lower material costs from procurement improvements, improved pricing and increased operational efficiency as well as leverage as we were able to hold our cost base relatively stable while increasing sales. Adjusted EBITDA was $42.9 million for the quarter and reached $161.2 million for the year. Q4 represents the third quarter in a row above the $40 million threshold. The resulting adjusted EBITDA finished at 19.2% for the quarter and 18.6% for the entire year. And on a full year basis, this represents a significant improvement of 310 basis points over 2023, something that we are very proud of internally. We are clearly well on our way to our goal of 20%. Both Accessibility and Patient Care saw good improvements in adjusted EBITDA margin. And to provide more detail on Accessibility, North America finished with 23.2% margins for the year, and Europe improved by a whopping 480 basis points to finish at almost 15% for the entire year. Improvements in adjusted EBITDA margin in all segments and divisions are driven primarily from improvements in gross margin that I previously mentioned, which was powered by Savaria One. We incurred $5.5 million in strategic initiative expenses for the quarter and $21.6 million for the year, in line with our expectations, and these fees are mainly consulting costs as we've been noting all year long. Finance costs were $2.4 million for the quarter, and excuse me, $18.5 million for the year compared to $4.8 million and $21.8 million, respectively, last year. The main drivers of the quarterly and yearly decreases is lower interest rates on our debt as well as the lower overall debt balance as we repaid that debt throughout the year, driven by our strong cash flows. Net earnings was $14.3 million for the quarter compared to $11 million last year. And for the full year, net earnings was $49 million versus $37.8 million in 2023, which is a large improvement of approximately 30%. I'm now going to provide commentary on our balance sheet and cash flow. And cash flow from operations in Q4 was $34.2 million, including a reduction in working capital of $1.2 million compared to Q3. We were able to reduce inventory by $6.3 million in a few of our key manufacturing facilities as well as increase our payables globally. Our trade AR increased in the quarter but finished below last year. Overall, we improved our working capital by 11 days versus 2023, which is above our internal target for the year. CapEx for the year finished at $20.1 million, which equates to 2.3% of sales and is in line with our guided range of 2% to 2.5% of sales. Free cash flow after debt-related costs and dividends was $34.9 million for the year, which is $43.2 million better than 2023, a significant improvement. The strong free cash flow helped us to repay debt and reduce our leverage ratio to 1.63 and helps us ensure a strong balance sheet to start 2025 so that we can be prepared for any opportunities or challenges that come our way. And for 2025 guidance, due to uncertainties around tariffs and retaliatory tariffs, we did revise our guidance, as Sebastien noted. We're guiding to approximately $925 million of revenues with an adjusted EBITDA margin between 17% and 20%. At this point, it remains very difficult to estimate the total upside or downside from tariff-related impacts. And with that, this completes my prepared remarks. I'm now going to turn the call over to Jean-Philippe to provide further details on how we're progressing with Savaria One.

Super. Thank you, Steve, and good morning, everyone. While the U.S. tariff situation will certainly trigger actions and set new priorities for the months ahead, the plan we're executing with Savaria One is still highly relevant. The tariffs will increase pressure on our results for some time while we adapt, as Seb mentioned, but our business is diversified both geographically and in terms of market segments, and the majority of our business is not affected by tariffs. Therefore, the impact on Savaria One will be limited and involve only a handful of colleagues who must now put in place mitigation measures while the rest of us carry on our work. In the long run, Savaria will succeed because of its great products, an excellent dealer value proposition, a sound customer experience, a competitive supply chain, and safe and reliable manufacturing facilities. Those are all things that we are focusing on with Savaria One. So expect us to remain focused and diligent in making Savaria fundamentally better and stronger through 2025. 2024 was our first full year in Savaria One as we launched the effort towards the end of 2023. I'm happy to report that we reached the objective we had set for ourselves and delivered more than $30 million of in-year EBITDA improvements in 2024 through a combination of commercial, operational and supply chain improvements. In fact, I was recently looking back at our Investor Day presentation from April 2024 to review the plan as we communicated it then, and I was happy to see that we implemented pretty much everything we had line of sight on at that time. For example, we talked about cross-selling. And in fact, we grew sales of Garaventa platform lift products to Handicare dealers in Europe, and we also grew acute care sales in the U.S. [Technical Difficulty] through the acute care in the U.S. in 2024. We also grew sales of services across Accessibility businesses with new commercial offers for maintenance and modernization of existing lifts, both in North America and in Europe. We expanded the capacity of our main facilities like Brampton and Surrey for elevators but also reorganized the Kingswinford facility in the U.K. to a one-shift work schedule. And that was a big success as we now produce as much with one shift in the day as we used to with two in the past. We nearly doubled the throughput of our Mexico facility, which now supplies Brampton and Surrey but also Beamsville, our bed manufacturing facility. We're also now set up to assemble a new product, the Luma, all in Mexico and for all markets around the globe. We completed just north of 50 procurement RFPs or price renegotiations in 2024. We're experiencing negative cost inflation in most our businesses, thanks to those efforts. In Patient Care, we added new reps to expand the geographic footprint of our acute care business. Those reps generated even more sales than what we had planned for in the first year. Finally, we scaled up the reconditioning line for new stairlifts in the Netherlands, and this allows us to reduce our environmental footprint while also addressing the needs of local authorities. We are now setting up a similar reconditioning line in the U.K. so we can better serve that market, too. Those are just a few examples, and in total, we implemented about 200 distinct initiatives since starting Savaria One. In terms of impact, we estimate that about half of the gains realized to date relate to commercial actions and the other half to operational and supply chain optimization ones. The one place where we can still do better is in growing the top line either by growing share of wallet with our dealers or expanding our network of dealers or growing our direct store operations around the world. In 2024, we made conscious trade-offs of volume for better margins, which we believe were appropriate to set the business on stronger economic foundations and instill discipline in our pricing. Yet our goal in 2025 is to cautiously reenergize the top line, especially in Europe, where we have the most room to grow in the short term while preserving those strong profitability foundations. I will caution us all that it is unclear what kind of growth we may experience in North America in the very short term, given our elevator business is correlated with economic growth, new house starts. And at the moment, given all the changes happening in the U.S., it's hard to predict where those drivers are going to be headed. Also we continue to have momentum. It's important to remember that we will have tailwinds from our 2024 initiatives through 2025. For example, all the recurring cost reduction measures implemented in the second half of 2024, whether they relate to process changes, headcount reductions, material cost reductions or other levers will only give us full year benefits in 2025. Furthermore, we continue to add new ideas to our pipeline. Only in Q4 of last year, for example, we added $6 million worth of new ideas, almost all of those related to cost reductions. Through our monthly and quarterly business reviews, we continue to identify new opportunities and add initiatives to our pipeline. Finally, we plan to launch another round of ideation involving all divisions in Q3 of this year. So all this to say that putting aside the disturbances and financial impacts of tariffs will certainly have on our business in the short term, we are continuing to make strong progress with Savaria One and are expecting sustained improvements through 2025. I will be repeating what Seb said before, but even in Savaria One, we are adopting a long-term perspective on our business and continue to make choices that support the long-term growth and the long-term success of Savaria as a global leader in the accessibility space. We're excited to see all the progress made and the road map ahead of us for 2025 and look forward to see the results materialize in our numbers. Thank you for your attention. Seb, any closing remarks?

Thank you, JP and Steve. A very good overview of what's happening at Savaria. Again, we are lucky, good industry, aging population, tariff or not, this is not going to change. And as you mentioned, JP, Europe is not related to tariff. This is not going to change. You can conclude the same game plan. The Patient Care manufacturing in the U.S.A. could be a positive thing for them so I'm feeling good about what's happening in the business. So I think Sarah, we are ready to have some questions from our analysts, which are making a fantastic job to cover Savaria. You did some good report yesterday. You understand well the business. So let's see if you have some questions about last year or just on tariff, but we are ready.

[Operator Instructions] First question today is from Derek Lessard from TD Cowen.

First off, great quarter everyone, an absolutely great year. Too bad about the political climate. But I did want to, I guess address the elephant in the room right off the bat and fully realize that the situation is fluid and every company in Canada is trying to assess the impact, but maybe I'll frame the question a little bit differently. Are you aware of any advocacy groups or lobbyists or lobby groups for that matter in the accessibility industry? And maybe can you just talk about what you're hearing from them on the ground and maybe from some of your U.S. clients and maybe your partners and dealers?

Thank you, Derek. So for sure, again, this is very, very new, okay? Again, it has been officialized this week that there will be a tariff from Canada going to the U.S. and a very small retaliatory on the other side. But again, we have the FDA. We have the medical industry for many of our products so yes, hopefully, people will do their job. But again, it's very new. And I think this is definitely on a list of to-do to work with them to see how we can make an impact on the tariff. We saw yesterday that they have moved something for 30 days on the car industry. They started with that. But definitely, it's on the agenda to review. But as of right now, again, we try to do what we control in our hands.

Yes, absolutely. Okay, that's fair. So just maybe switching gears. I just wanted to dig in a little bit more on sort of residential and commercial demand in North American accessibility. You did mention in your remarks that it was flat this quarter and that you said it was a more difficult U.S. market. Could you just maybe talk about some of that, what you're seeing in terms of near-term demand, obviously, irrespective of the tariff implications?

Thank you. So first, like the person that has started a house a few months ago, again, the tariff situation, they are continuing to build. So I think again, I don't see any impact on the short term. We are busy. We are building home elevators. The orders still come in is quite good. It's good that sometimes our growth from 1 quarter to the other is -- again, can be challenging. We have some deadlines on price increase. We can have a spike in our backlog. We did a lot of effort last year to push our production to understand, again, what is our capacity, to free up some volume for the future. So yes, we have reached a bit of backlog in Q1, Q2, Q3. That's why Q4 was a bit more flat in terms of residential and commercial accessibility. It's not necessarily because there's no permits or there's no construction. I think it's just a result of how we have executed our backlog last year. And Steve, you want to add maybe something?

Yes. I just want to add, Derek, there is a little bit of lumpiness on the overall business in North America. But one really strong indicator that we have is the backlog in our direct stores. So our direct stores are the entities that are installing products, whether it's residential or commercial. And that backlog is actually at an all-time high. So we've been growing that backlog. We feel good about what that means for the future. Typically, our direct store backlog is anywhere from within a few weeks, but they can reach out to 1.5 years to 2 years depending on the construction timeline. So the really positive sign for us is that, that backlog has never been higher, so a good indicator for us for 2025 and going forward.

And I think with some new products, through-the-floor, the Luma, again, this is a growing segment, this is something a dealer was requesting, hey, why you don't have an through-the-floor? And this product is going to be installed in a day, very fast to install. So this is going to add to generate some growth. So again, we're feeling quite good about the future in North America and in Europe.

Yes, I appreciate the color. That's great color. And maybe just one housekeeping for Steve in terms of your expectations for, I guess, working capital in 2025 and maybe a word on your CapEx plans.

Sure, yes. So working capital, we did very well in 2024. We reduced our working capital days by 11. That was over and above our budget to be transparent. We're likely not going to get another 11-day reduction in 2025 but we are still targeting a reduction. We still think there's a few pockets that we can do better on inventory. AP days are pretty good and AR days are pretty good, but we still think we can do a little bit better there as well. So there will be improvement. We'll see on a dollar basis. It depends on how much we actually grow sales, but on a working capital days basis, 2025 should be better than 2024. Your second part of the question around CapEx, we've historically always been in the 2% to 2.5%. 2024 was 2.3%. 2025, depending on what happens with operations in the U.S., we're probably going to be closer to that 2.5% mark, Derek. So I think if you're putting in your model, I would say 2.5% is probably a safe way to go.

Again, great year, everybody. Congratulations.

We'll now move to our next question. This is from the line of Frederic Tremblay from Desjardins Capital Markets.

Just wanted to start with the margin range you provided for 2025. Just on the 17%, I'm curious to maybe hear your thoughts on what the main assumptions are there. And specifically, I know in the prepared remarks, you mentioned a small price increase. Is that included in there? And are there any other mitigating actions that are in that 17%? Just a bit more color on that, please.

Yes, for sure, we have wider the range from 17% to 20%. Again, you see that with the results we had towards the end of the year, we're really trending towards 20% so I think that was happening. But yes, the tariff will bring some short-term challenges. And again, we have a solution and we are going to act quickly. For example, price increases, a way to reduce tariff by assembling locally. I think we have a good game plan. But again, all this is very fresh. We did not want to remove our guidance and have nothing for an investor, that's not our style. So that's why we said we moved from 17% to 20%. Again, 17% is probably our worst-case scenario. Again because we are doing action, but it's hard to quantify everything. And for sure, towards the second half of the year, could we trend back again in the 20%? I think the answer is yes. But as a full year, our guidance is 17% to 20% because there still is uncertainty right and left. But rest reassured we're doing things quite quickly because we don't like turbulence.

Okay, that's helpful. And then just, I guess, maybe as a follow-up to that, you mentioned the 20%. With the scenarios and the plans that you've put together, do you feel that you will have what you need to get to that 20% level? Maybe -- I think you said maybe potentially late 2025, but certainly in 2026, would that be the goal potentially for 2026 to get to that 20%?

I think you saw a bit how we finished the year. Again, we have improved by 3 points last year from 15.5% to 18.5% for the full year. Again, many divisions have done many times over 20%. Yes, we need to cover their head office costs. But at the end, I think we have a good game plan. At Savaria One, JP is super, he is still present. He is still there. He is pushing, pushing with the team. So I think we're feeling good about that. And all this to say I did not change the discussion with my team. We still talk about 20%. I'm not going to change the speech to 17%. But it's just because of tariff, we have to moderate our guidance, but definitely, the mindset did not change, Fred, it's 20%.

Okay, great. And maybe last one before I get back in the queue. Just on competition, how do you feel about Savaria's competitive positioning in the current environment? I'm thinking obviously about U.S.-based competitors. Do you feel like you're still well-positioned to keep your market share and potentially improve market share in the coming years?

Thank you, Fred. But again, Savaria, we have 12 factory. I think we're close to 1 million square foot of manufacturing. It's the biggest in the industry, in our small industry. So I think we're, again, inflation or the tariff, it's a bit for everybody, right? Because even the U.S. manufacturer, they import some parts from right and left from Asia, from Europe. So it was a worldwide economy. So definitely, they will be impacted and they would need to do some price increase as well. Canadian companies export to the U.S., yes, everybody would need to do some. So I think I'm feeling quite good about our position and I don't think this would change anything. And even we'll probably find some way to be stronger. And I think we have always been good with our dealer, they have been good with us and I think that will just continue.

We'll now take our next question. This is from Zachary Evershed from National Bank Financial.

Really impressive organic growth out of Patient Care, and I heard you mention more reps serving the acute care market. Do you think you can continue pushing the Patient Care segment to grow at a similar organic rate in the quarters ahead?

I think, again, Zach, we have seen -- when we started Patient Care after COVID, they had 2 good quarters, Q1, Q2, 20%. Again, they did 20% again in Q4. And I wish we'll do 20% each quarter but it's not realistic, right? I think everybody knows that we were targeting 8% to 10% growth. So it's just that it was an accumulation of projects, and everything has happened somehow in Q4 to deliver, to finishing install, to send some quick turnaround products. So I think definitely for the year, again, we're expecting a modest growth as all the other divisions do. Hopefully, it will surprise us again and do the same thing but I think it was a very special quarter. It was -- because Q1, Q2, Q3 was flat.

Good color. And then I was kind of surprised to hear that you're experiencing lower raw material costs in both segments again. Any color on what's driving that and how sustainable you think it is?

So it's not happening -- it's JP, it's not happening out of luck or it's not because just the commodities are going down. It's because we took a lot of proactive actions. So you can imagine, as I mentioned, we had 50 different price negotiations or RFQs. We went through all of our bill of materials, anything that we could challenge. Because it's not been challenged for a long time, we did. So I think at the end of the day, when we did negotiate prices, we got very steep reductions. And if you add up all these reductions in average, that's why we see some negative inflation. So mind you, suppliers will always come and try to get some price increases, but I think our procurement team is doing an excellent job to both counter this but also sometimes reduce the cost. So it's the sum of all these efforts that allowed us to reduce our material costs.

Excellent. And then if you're thinking you can get back to 20% adjusted EBITDA margins in the back half of the year and guiding towards 17% to 20% for the full year, does that mean that you're looking at a pretty substantial drop in Q2 before your actions can work to raise that EBITDA again?

I think it's a tough question, Zach. Again, it just happened yesterday that the tariff were official. I think in the next -- and again, January and February was no tariff, right? I think we're going to turn around in the next few weeks. So can we have a tough March and April? We will see but we are going to turn around quickly. And again, we're there for the mid- and long term. We're not just for 1 month or 1 quarter. And we have been in the business for 35 years. And we target over 17% for the full 2025, but the exact, what will happen in each quarter, we have never really done that. We don't do guidance per quarter. Sorry, Zach.

Fair enough. And just one last one for me. How did January and February go so far in the quarter?

My lawyer will not be very happy. Forward-looking guidance, we don't like it. But again, we just continue a bit -- we're planning to have a good year this year. Things need to be split over 4 quarters. So I think we're happy with the beginning of the year. And now we'll see what happens in the next few weeks but we're going to turn around quickly, as I said, on tariff. But we will have a good year. We are busy so I'm feeling good about it.

We'll take our next question. This is from the line of Julian Hung from Stifel.

It's Justin Keywood. Just some additional questions on the tariffs. So we understand there's significant U.S. capacity, 60,000 square feet where production could potentially shift if needed. What are some of the parameters there where you would increase investment into the U.S.? Or perhaps price increases is the appropriate route? How do you balance those options?

I think, Justin, if I understand correctly your question, how we mitigate that is a mixed bag, right? A bit of price increase to a customer. After that, product that we have tariff, how can we mitigate that and maybe do the final assembly in the U.S. How can we find a different supplier in the exact country where we need to do the assembly? So I think it will be a mixed scenario that will give us some results. And be assured that in the next few quarters, I think we'll be able to give you some color on the size of tariff we got on each quarter, what are we doing, how we see things. But again, it's very fresh, okay, it just happened yesterday. So now all the scenario we have done in the last few weeks, we're going to fine-tune it and we're going to put that into execution.

Understood. And then the balance sheet is in pretty good shape, 1.6x levered. The valuation, it's at a 2020 low right now. We're calculating it at 8x the guided EBITDA. What are some of the capital allocation priorities? Is buybacks or an SIB on the table? I know that Savaria has been acquisitive in the past. Are there any M&A opportunities perhaps in the U.S.?

I think, again, good question. Yes, we are very lucky we have a good balance sheet. And you see, balance sheet is important when there's a bit of more turbulence. The guy that doesn't have a good balance sheet make it much more difficult. So again, M&A, our friend, Nicolas is still working with us. He is doing some phone calls, so for sure, we are still looking at that. Again, there will be more some tuck-in and some major acquisition. Are we going to close one this week? I think we'll still wait to see what happen a bit with the tariff. But definitely, this is on the plate. I think Steve said earlier, CapEx. We continue to make investments in our R&D because it's important to launch some new products, to buy equipment, to improve our factories to become more productive. So definitely, we're going to continue at the same rate we were doing in the last few quarters. Steve, you want to add something?

No. That was a good summary.

Great. Just one final one on Europe and Handicare. Are there any sales into the U.S. or is that contained?

Since we did the acquisition, we brought back everything to manufacture in North America, so no, Handicare doesn't shift from Europe to the U.S.

We'll take our next question. This is from Jonathan Goldman from Scotiabank.

A lot have been asked already. I guess a couple for me on tariffs. The first one, Seb or whoever wants to take this, the last time there were tariffs in North America specifically on steel and aluminum, were any of your products exempt at the time? Was there a special carve-out for medical devices? And were your products classified that way?

Last time again. It's really the first time that we have really an impact from Canada going to the U.S. Before, it was always a little steel and aluminum or something from China to the U.S. So again, we have always been able to figure it out and not been really impacted. But this time is really the first time that we have to review what we are doing.

Okay, makes sense. And I guess my second question, how easy is it for a dealer to switch between elevator brands or stairlift brands?

Again, many of our dealers work with us for many, many years and they invest some time to train on some of our product, okay? After that, we always talk about a one-stop shop. It's one phone number for the sales, for the tech support. So it make it very easy for them to make business with us. They can go on our configurator to buy their products online, to see the status of their order. So yes, they can always switch but they will need to retrain their sales team, their admin team, their installer. So again, I would think it's a bit more difficult to change anyway. But after that, sometimes you're successful in one area because you're selling one brand. Maybe next door, you have a dealer that sell a different brand. So it doesn't mean that the next day, you have access to the other brand, right? So I think again, we are comfortable and we'll work with this, with our dealer and everything will be okay.

Okay, makes sense. And maybe one more going back to the M&A question. How would you think about either shifting production from where you are to excess capacity in the U.S. or maybe buying capacity through a deal? How would you balance the 2 options versus the financial commitment and the timing of those? Which would make more sense?

I think, again, we go -- do an M&A of a competitor. He's not going to manufacture my Savaria product. My dealer want to buy the Savaria product. So again for me to shift production into an empty factory where I have patient care management or to just shift it to M&A for me is the same effort. So I think right now, again, we want to continue with the one-stop shop. That's one of our strengths. So we will see how we need to balance things in the next few weeks.

We'll now take our next question. This is from Michael Glen from Raymond James.

Just maybe a couple of questions for me. So you gave some outlook commentary for the elevator segment in North America. I'm just wondering if you can give some thoughts on the stairlift outlook in North America, industry-level type numbers in terms of what we should think about for industry organic growth in 2025.

Again, unfortunately, we don't really disclose it per product. For sure, the full family, we are targeting approximately 8% growth. But definitely, stairlift, this is an area that since we brought back the manufacturing from Europe to North America, our lead time are fantastic. If you want a straight stairlift, I ship it the same day or within 24 hours. Our curved stairlift lead time is like 5 days. So I think we are in a very good position with our manufacturing, but definitely, this is something and we hope that we can continue to grow. But again, if you look at the new product, the Luma, again they start from scratch and should have a fantastic growth. But for us, it's a mixed bag. If one product goes a bit not as good, the other one goes better but the success of Savaria is the diversity.

How would you characterize -- I recognize this might be a tough one to answer, Sebastien, but how would you characterize your competitors' manufacturing footprint in the stairlift market? Is it primarily domestic-based or there's a lot of import product associated with the U.S. stairlift market?

I think, again, there's a lot of factory established in the U.S. that manufacture locally. But again, it's a global supply chain so some people might bring some parts from Asia or from Europe. So again, I think it will be inflation for everybody and not just for Savaria.

[Operator Instructions] There are no further questions coming through so I will now hand back to the speakers for any closing remarks.

Okay, thank you. All the questions from analysts, again, you're doing a fantastic job to cover Savaria so thank you again. And Sarah, I will say that was a good call. Thank you very much, and we are trying to give the best color we can. And I'm sure we will succeed in the next few weeks, few months to overcome those short-term challenges. So thank you very much, Sarah.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.