Savaria Corporation (OTCPK:SISXF) Q4 2021 Earnings Conference Call March 24, 2022 8:30 AM ET
Company Participants
Marcel Bourassa – President and Chief Executive Officer
Steve Reitknecht – Chief Financial Officer
Sebastien Bourassa – Vice President, Operations and Integrations
Nicolas Rimbert – Vice President, Corporate Development
Conference Call Participants
Frederic Tremblay – Desjardins
Derek Lessard – TD Securities
Michael Doumet – Scotibank
Nick Agostino – Laurentian Bank Securities
Zachary Evershed – National Bank Financial
Sepehr Manochehry – Eight Capital
Operator
Good morning, afternoon and evening. My name is Ali and I will be your conference operator today. At this time, I would like to welcome everyone to the Savaria Corporation Q4 2021 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 23, 2022 with respect to its Q4 2021 results. Thank you. Mr. Bourassa, you may begin your conference.
Marcel Bourassa
Thank you, Ali. Okay. It was a challenged year, okay, but a great year, okay. Great year, and we are very excited okay, not just me, okay, to this 2022, okay. I think ‘21, okay, was a good year, okay. But we prepare a lot of thing for 2022. Don’t forget that right now with some acquisition that we make, okay and the major one is Handicare. So, we will sell, okay, around $800 million, okay. How many EBITDA, you just have to choose the right number, okay. And we just announced you before at the beginning of the year that we will make between $120 million to $130 million. We made the acquisition 1 year ago of Handicare or thinking that they were good, but they are better than working in, okay. They have better people. And on that, I thank them, okay, to come board, okay and say we want to work together. It’s always in life, okay, a teamwork. If you don’t play the teamwork, okay, you are at the wrong place, okay, because if you want to be successful, okay, you need all the people together.
So, we have more than 2,200 employees. We are in – with this acquisition, we are in over 40 countries and that’s major. And what we have done, okay, we imported technology of [indiscernible] from Handicare Europe to Toronto. We are well advanced in the integration and we are in production, okay. But just a vending machine okay, will arrive in maybe 45 days, okay. But right now, we take the curve okay for the [indiscernible] arrived from Europe, okay. So we missed a couple of dollars, because it’s quite expensive, the freight. But even, okay, it’s a challenge, okay. This was a tough year, you know something and you know, okay, the materials, okay, was a challenge and is a challenge. The cost of trade okay was a challenge and it continued to be challenge. And it’s not easy, but that shows that we have a good team, a good team to find a problem and just discuss a bit what we do. And that’s the forte of Savaria. We have a good thing. And we – if we have to change people, we change people, what – so nice people come with us, okay, in 2022.
Just an example in the patient and saying, okay, we have a new director down there and they have the great experience in our industry and he will bring this division at another level, another level of EBITDA. What is very important, okay, for me and for my people is what kind of EBITDA, what is the percentage. And we want okay to be by 2025, we have a big goal. Our big goal is to reach $1 billion in sales, okay. And with the $1 billion in sales, okay, we have to be around 20% in EBITDA and we will be around 20% across the synergy with all the people, okay.
So, thank you to be with us this morning guys. We need you, because that’s you a key we are right on Savaria. And you – there was an okay or my [indiscernible] like it was like 15 years ago. But this is a fact this is what it is. And thank you to following Savaria and to be interested in the history of Savaria. I think we have a great history coming from – when I bought a company we were like 4 people and right now, over 2000. And at the beginning, we were selling $200,000 a year. And this year, we will sell around $800 million. So, that’s a good, but we are there okay, because of the people. And we have good customer and has a repeat what I was doing selling 15, 20 years ago. So the customer write the check for whatever with a smile, because what that’s gave them okay, more liberty to move. And that’s so important.
So today, we have the pleasure, okay. I will pass to Steve, okay, that will tell you a bit where we are with our finance. And after that, we will have a question that we will answer to you with pleasure. On the call this morning, we have Nicolas we have Sebastien and should tell you that Steve is the first one to speak, after that, Nicolas and Seba and myself, who will answer the question that you have. So, first of all, okay, Steve.
Steve Reitknecht
Thanks, Marcel and good morning everyone. I will begin with some remarks regarding our 2021 fiscal year consolidated financial metrics. For the year, the corporation generated revenue of $661 million, up $306.5 million or 86.5% compared to 2020, mainly due to the acquisition of Handicare in March 2021 and also due to organic growth of 4%.
Gross profit and gross margin stood at $215.5 million and 32.6% respectively compared to $122.1 million and 34.5% for 2020. The increase in gross profit was mainly attributable to the addition of Handicare. The decrease in gross margin was primarily due to additional costs related to the supply chain, including shipping costs and also the reduction of COVID-19 employment retention subsidies from the Government of Canada’s program.
Adjusted EBITDA and adjusted EBITDA margin stood at $100.3 million and 15.2% respectively compared to $59.8 million and 16.9% in 2020. The increase in adjusted EBITDA dollars is again due to the addition of Handicare. The decrease in adjusted EBITDA margin is due most notably to significantly increased shipping costs in 2021 versus 2020 as well as a large reduction in Government of Canada, COVID-19 employment retention subsidies. Total subsidies received for 2021 was $3.2 million versus $6.9 million in 2020, reflecting a decrease of $3.7 million year-over-year.
Now I’ll move on to our segment results. Revenue from our Accessibility segment was $484.3 million for the year, an increase of $227 million or 88.2% compared to 2020. The increase in revenue was mainly attributable to the acquisition of Handicare, which provided 87.3% growth. Organic growth of 3.5% was driven by strong demand in the residential sector and was partially offset by a negative foreign exchange impact of 2.6%. While our residential sales were strong throughout the year, we continued to see weakness in the commercial sector.
Adjusted EBITDA and adjusted EBITDA margin both before head office costs stood at $86.2 million and 17.8% respectively compared to $51.1 million and 19.9% for 2020. The improvement in adjusted EBITDA is mainly due to the acquisition of Handicare. The reduction in adjusted EBITDA margin is partially due to additional costs related to supply chain, including shipping costs as well as a reduction of the Government of Canada’s subsidies.
Revenue from our Patient Care segment was $136.7 million for the year, an increase of $57.4 million or 72.4% when compared to 2020. Revenue growth was mainly driven by the acquisition of Handicare, which contributed 71.3%. In addition, the segment saw 5.5% of organic growth for the year, which was driven in large part by the last quarter of 2021 which provided 17.1% organic growth. The improvement in organic growth was driven in large part by the easing of pandemic restrictions and improved access to long-term care facilities.
Adjusted EBITDA and adjusted EBITDA margin both before head office costs stood at $16.7 million and 12.2% respectively compared to $10.4 million and 13.1% for 2020. The increase in adjusted EBITDA was mainly due to the acquisition of Handicare and the reduction in adjusted EBITDA margin is primarily due to the aforementioned additional costs in the supply chain and a reduction of Government of Canada’s subsidies.
Revenue generated from the Adapted Vehicles segment was $40 million, an increase of $22.1 million or 123.4% when compared to 2020. The Handicare Vehicle division based in Norway provided 119.9% of acquisition growth for the year. The Canadian Auto divisions experienced organic growth of 3.5% for the year, driven mainly by strong sales in Q4 2021 as a result of some pent-up demand from earlier in the year.
Adjusted EBITDA and adjusted EBITDA margin both before head office costs finished at $3.2 million and 8% respectively compared to $0.6 million and 3.4% for 2020. The increases in both metrics were mainly due to the acquisition of Handicare and some recovery from the economic slowdown caused by the global pandemic partially offset by a reduction of Government of Canada COVID-19 subsidies. For the year, net finance costs amounted to $15.8 million compared to $3.9 million for 2020. The increase is mainly due to higher interest expenses due to additional long-term credit facilities related to the Handicare acquisition.
Net earnings reached $11.5 million or $0.19 per diluted share for the year compared to $26.5 million or $0.52 per diluted share for 2020. Net earnings was largely impacted by amortization of intangible assets related to the Handicare acquisition. Adjusted net earnings, excluding amortization of intangible assets related to acquisitions, reached $41.8 million or $0.67 per diluted share compared to $31.8 million or $0.63 per diluted share for 2020. This reflects an increase of 31.3% or 6% on a diluted share basis.
Turning now to capital resources and liquidity, Savaria generated cash flows from operating activities of $57.3 million for the year compared to $49.3 million in the prior year. The year-over-year increase was mainly due to increased adjusted net earnings from the addition of Handicare. Strategic investments in inventory caused an increase in non-cash operating items for the year of $13 million versus a decrease of $6.1 million in the prior year. As at December 31, 2021, Savaria had a net interest bearing debt position of $315.4 million and it was in compliance with all of its covenants. And on a trailing 12-month adjusted EBITDA basis, Savaria’s debt to adjusted EBITDA ratio was approximately 3.5x. Savaria has funds available of approximately $130 million to support working capital investments and growth opportunities.
Now looking forward, unpredictable changes in the macroeconomic environment make it difficult to predict future performance. However, considering our recent financial performance and our strategic integration plan with Handicare, we are confident that for fiscal 2022 we will generate revenue in excess of $775 million, with adjusted EBITDA in the range of $120 million to $130 million.
And with that, this completes my prepared remarks and I will turn the call back over to you, Marcel.
Marcel Bourassa
Steve, thank you very much, very well done, okay. And just to add okay an information, okay, that maybe you don’t know, our booking what is very important, okay, if you want to see what will be a good quarter okay and what would be the year, okay, we are looking at Savaria, it takes Savaria in Toronto, okay, it’s 3x that it was last year, not 20%, okay, 3x. You can see the backlog that we have in residential elevators, okay, it’s amazing. So now we have another problem, okay. We have to deliver fast, okay. So we upgrade ourself, okay, upgrade our people and we work hard okay to make more production than we were doing. So it’s another time in our life, okay. We never have the bookings say that we have 3x, okay, subject to the year per year. But it’s a fact right now. So it’s a great interest okay that I tell you this information and I think that’s validated a little bit to what Steve before. So, we are ready for all the questions that you can ask. Ali?
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] And we will go ahead and take our first question from Frederic Tremblay with Desjardins. Please go ahead.
Frederic Tremblay
Thank you. Good morning.
Marcel Bourassa
Good morning, Frederic.
Frederic Tremblay
I believe, Marcel, you mentioned that you would like to get to 20% EBITDA margin in 2025. That would be I think the highest margin in company history on an annual basis. I was just wondering if you are – are you referring to margin for the entire company or for the accessibility segment? And I guess, maybe if you could maybe provide a bit more details on the factors that would allow you to increase margin to around 20%?
Marcel Bourassa
Okay. And Sebastien okay will complete, okay, my answer is this one, okay. For sure, okay, we have some divisions that we get less EBITDA, okay. But for me, when I say around 20%, okay, is for the how the company together. And it’s why I will say when we bring in North America manufacturer, the stairlift that Handicare is doing. That’s a project that has better margin, okay. I would not say very high, it’s not too high, but to be reasonable too on the pricing. So for me, okay, it’s for the company, 20% Frederic. Sebastien, you have something to add?
Sebastien Bourassa
As you know, we are under transformation. We have acquired Garaventa a few years ago with Spain and now Handicare, so there is a lot of moving pieces. But I think, yes, [indiscernible] been first, patient lift first and the car division third. But definitely, I think we have a lot of activities to support this target goal. And hopefully, we will be able to deliver in the next few quarters and few years on that, but a lot of opportunity for that.
Frederic Tremblay
Okay. You mentioned the large backlog in Toronto. I am just curious if you have any comments on I guess the split between residential and commercial? I guess I am more interested in how the commercial side is evolving in terms of quotes or backlog in the recent months? And what you are seeing in terms of the potential recovery from that particular market?
Marcel Bourassa
Yes. Okay, that’s a good question again, Frederic. For sure, the number of elevators that we have in our backlog, it’s incredible, okay. And for sure, the COVID affect a lot of commercial activity, because people work at home okay? So, if we go as an example, downtown Montreal, okay, it’s not the activity it was before. But they have to work home, okay. So they make some adjustment at home. And – but in reality, we think that’s all commercial, okay, we will get a new push this year. Sebastien, you have something to add on that?
Sebastien Bourassa
Not for sure residential sector – residential is not just home elevator, okay. It’s home elevators it’s incline platform, it is stairlift, okay. Now we are a big player in the static industry. That’s why this Handicare is very interesting because it position ourself in a very good shape in bringing back the technology from Europe to Toronto to manufacture to Australia and to give us better lead time and we should be able to just continue to accelerate our growth into Australia. Commercial, as Marcel said, it has been slow, but it’s recovering. And now, the good news at least we have a good backlog so we can plan our growth. People are more careful also than it was before. I think with all the spending to meet the supply chain, people try to put their order in advance to make sure that the production will try to enter date. So, I think it’s – we are lucky, Fred, good year in front of us.
Frederic Tremblay
Great. Maybe last question for me for – yes, sorry, go ahead.
Sebastien Bourassa
Fred, I just want to add something, okay. With Handicare, okay, we stepped a little bit the territory like we and the more in North America, for sure, are we discussed with our people in Europe. And Europe push like the work with Garaventa, okay? Garaventa is a great company, okay? But I think to work with somebody’s directly full time, okay, and to the territory of Europe I think this segment of Garaventa will be better. So we have a lot of velocity coming with this acquisition. I just mentioned at the beginning of this year, we made just a small acquisition, okay, about somebody who make the controller, okay? So we’re buying from the guy in Europe, okay the controller, but now month be independent, okay? So we buy this guy. So we are always looking what we can do to be better. And as Steve mentioned, okay, we have – for sure, our ratio is not is not what I want to be. But I think this year, we will have a better ratio to put some acquisition, just to be always better and deliver the best quality and the best security to the customer.
Frederic Tremblay
Great. It’s a great segue into my last question. Maybe first is in terms of capital allocation priority for the year between CapEx that repayment and potential M&A? Any comments there.
Marcel Bourassa
Yes. Just small M&A, okay? But small M&A, and we’re looking everywhere. But now we are looking everywhere around the globe booking. That’s amazing, okay, what this acquisition of Handicare. And I mentioned, again, okay, have good people like that, and at the same team that we have good people when we buy Garaventa. And without these people that we work together, you will see, okay, that we will make some small acquisitions, but we work a lot complete the integration, okay? And sometimes we have to look inside our company, okay, on the side of a division okay; we can be better and instead of key looking always for acquisition. So no big acquisition this year.
Steve Reitknecht
And just to add to that, Marcel, if I can. I mean it’s looking at the de-leveraging profile for this past year for 2021, we didn’t de-lever since the date of the acquisition until the end of the year, which was about 10 months. And that was expected because of all of the large one-off costs we had acquisition and integration related. Most of that is behind us. There will be some integration costs ongoing. But we will be de-levering further in 2022 as per our initial plan of at least half a turn per year. Fred. And we are diligent with CapEx spending. We’re being very diligent. And we – as Marcel said, there may be some funding for acquisitions, but they will be on a small sort of tuck-in side.
Frederic Tremblay
Very interesting, Steve. Thank you.
Operator
And we will go ahead and – we will go ahead and move on to our next question from Derek Lessard with TD Securities. Please go ahead.
Derek Lessard
Yes. Good morning, everybody. And Marcel, your English is perfect. I just wanted to hit on again on the bookings being up 3x in the backlog there. It’s a good problem to have, obviously, maybe if you can just add a little bit more color on how you expect to deliver on that and clear through backlog?
Marcel Bourassa
Well, I will give you, and Sebastien, will complete my answer because he’s the guy responsible for the operation. But I would say, okay, like you know something we encourage stairlift, we can deliver, okay, like with the new – we can deliver like 2,000 curve stairlift with the system of Handicare. And before that, the cable or job, okay, at maybe 30, 40 a month, okay? So – but now, okay, just in that if we can talk about the curve stairlift, we find that – about residential elevators, okay? What is good at and it’s why the team is the team, the team, the team work okay, we have somebody from Handicare, I think they are same weeks, Sebastien, I would tell you, and they will work with us, okay, out and we pass, okay, like from six, seven elevators a day, okay, to 10, 12 a day. So new idea given experience and it’s out in the group. And when I tell you the same group of you, it’s good construction, okay? But when you have the talent and site use that, and that’s a value utilization for them. They say, hey, I don’t know, in Netherlands, okay, but I have these guys in Toronto. And that’s everything everybody is proud about that. Sebastien, you have something to add?
Sebastien Bourassa
Yes. For sure, Derek. Okay. We are likely we’re in a good industry. It has been a very support last year with the staying at home, the residential has been good and it continue to remain good. But fortunately, we had a bit of inflation on the sales price with our customer last year. So when you announced some price increase, there is a direct effect on the booking because we try to be respectful with our dealer to give them some time to pass on the order that they already have in in. So yes, there has been a bit of an over order because of some deadline on pricing, but this is good because what came in last year as a price increase from a supplier we had to reset the price with our customers. So that has been done.
And last year was challenging. Don’t forget, we had some bit of COVID. We had some labor shortage, but I think this year, we have made some activities to fill some gap, okay, where we needed to add some people. We are doing some strategic review in April with a key member of Handicare by the team of Pete that will work with our team here to see how we can improve and we review how we can add automation those process to be a bit better. So I think, yes, the good news is that at least we have the order in some of our divisions so that we can just execute on the growth plan that we want to have.
Derek Lessard
And [indiscernible] just one this as well as, do have any updates on the Toronto planning expansion? How it’s going and we can production wins and may be some areas where you still need to adjust?
Marcel Bourassa
Toronto expansion, yes, on a curve stairlift, we now, we are producing on of the two model Handicare for a curve. We would likely to this year to add production the second model. All the distributions of the straight stairlift of Handicare is now done from span factory in Greenville or from Toronto for the Canadian market. So that has been happening. And the rest is really expansion on our – do more throughput to our different line has some key labor at a different place. But I think the growth plan is what we are working on.
Derek Lessard
Okay, thanks for that.
Marcel Bourassa
Thank you, Derek.
Operator
Our next question will come from Michael Doumet with Scotiabank. Please go ahead.
Michael Doumet
Hi, good morning, guys. One sort of question with the 2022 revenue guidance. the forecast implies 17% growth year-over-year. And I guess if I used the number on the call maybe up to 21%. I obviously understand Handicare will contribute 2 additional months. But I wonder if you can comment just generally on price versus volume dynamic in 2022 and what we should expect there?
Marcel Bourassa
Yes, Steve will speak about that. But yes, I just want to tell you that we made some increase, okay, because we have to make some increase. So we put some increase in ‘21, okay? Another increase at the beginning of ‘22. And you I think that would help our margin for sure, okay, went out this spring will be an application. And I see that coming at the end of March and after that for the second quarter, that would be – I would be very surprised if that’s not a very good news that you will see in Q2. Can you add a couple of comments on that, Steve, please?
Steve Reitknecht
Yes, sure. So good question, Michael. I mean looking at what we’re seeing for 2022, our guidance – our published guidance has been in excess of $775 million, and it’s just – obviously, it’s difficult to an exact revenue number. But looking at our forecast and our budgeting for 2022, a significant piece is coming from Handicare. We have 2 more months, as you pointed out, 2 more months in 2022 than we had in 2021. And specifically on the organic growth side, what we are forecasting to achieve for 2022 is in line with our $1 billion forecast for 2025. So it’s in that approximate same guideline, same approximate percentage increase. A good portion of that will come from pricing. We have mentioned that we have done price increases in – at the end of Q3 in 2021. And we also have price increases in 2022 at the beginning of the year. As Sebastien said, it does take time for those to come through. So I mean, without specifically pinpointing how much, there is going to be a good portion of that organic growth in 2022 coming from pricing.
Michael Doumet
That’s helpful. And then the second – sorry. And then the second one, I guess maybe I wanted to focus on the supply chain. I mean, obviously, that’s been a challenge in 2021, especially when you’re thinking about all the freight costs you guys have had to push through. With that being said, obviously, I think you guys did a good job. I just wonder, given the supply shocks, are you thinking of potentially evolving your own supply chain and maybe your own production capabilities across geographies a little bit differently? Or do you think you have maybe the right formula today?
Marcel Bourassa
I think that you speak with Sebastien. So Sebastien, can you take this question because I know that you know the answer.
Sebastien Bourassa
Yes. For sure, Michael, has been very challenging supply chain purchasing in the last year. And I would say it remains challenging from 1 week to the other, there is some small issue, but we try a to have a better planning to make some PO in advance with our key supplier, and we discovered who was not good. When we have some issue, we might work on some equivalent parts so they do some testing to make sure we can not stop the production. Supply chain is not just about Asia, but at least in Asia, that’s our own factory in Xiamen and in Huizhou so at least, we control what’s happening there. And as of right now, they are doing a very good job, and they continue to ship what they are doing. And an example Marcel, has talked at the beginning of the call is the [indiscernible] acquisition, which was one of our key supplier of electronics. Electronics is a bit challenging here those years. So we did an acquisition in electronics to be more vertical integrated to eliminate some of the risk. And my friend, Steve, always remind me that I have a bit too much inventory. So yes, we have work to make sure we have the right inventory on the shelf so that we can deliver this growth. And one thing also to remember is in our key factory, we have some machinery we are able to manufacture some parts, some sites on something things. So I think this is – is important to remain flexible. That will be my answer for that, Michael.
Michael Doumet
That’s helpful. Thanks, guys those are my questions.
Marcel Bourassa
Thank you.
Operator
We will our next question from Nick Agostino from Laurentian Bank Securities. Please go head.
Nick Agostino
Yes. Good morning. On the supply chain side, I guess, two questions here. First, if you guys can talk about what impact did the flooding in Vancouver have on your Q4 results? Just trying to understand, was there any revenue opportunities missed as a result or was there any margin pressures that you may have seen in Q4 that don’t show up starting Q1?
Marcel Bourassa
Sebastien?
Sebastien Bourassa
Yes. So Nick, for sure, was very unfortunate, and we have a factory in BC, so it was not so far from us. I cannot say that it has a huge impact in terms of supply because we have a few weeks always of inventory in stock. Yes, we had some trouble in Q4 on the timing of the container. This has caused some additional costs. I think the answer is yes, okay. We are flat airfreight a few parts, pay additional money to move your container – but yes, it was not the best event with the flooding from.
Nick Agostino
Okay. And then just given the situation in China currently with the shutdowns in Shenzhen, I know your factory is near there. Just wondering if you could provide an update on what you guys have seen out of China and maybe if you’re taking any precautions ahead of any further shutdowns within that region?
Marcel Bourassa
Sebastien, please?
Sebastien Bourassa
Yes. The good news, Nick, that’s our own plan. So we have really the truth of what’s happening there. And since the Chinese New Year team continue to work every day. Yes, there has been some new lockdown from one city to the other. But as of right now, it did not affect us. We have increased a bit maybe the raw material we have in our own factories to make sure we don’t stop the assembly. But as of right now, I did not miss a west of shipping. And at the best of my knowledge, the Shenzhen border as we open for the shipping. So that should not be an issue. And there is not just one part also in China. And our second factory in Xiamen is quite far from Shenzhen. So I think so far, we have been okay, Nick.
Nick Agostino
Okay. And then my last question, just wondering on staffing for the growth that you guys are seeing, have you had to incur any well, first of all, what was the staffing impact in Q1 related to Omicron just here in North America and for that matter in Europe? And then secondly, have you – are you guys incurring any additional staffing costs to keep staff just given the fact that we’re seeing lots of moving parts on the site in general?
Marcel Bourassa
Yes. Sebastien answered that because, okay, you are there, okay, and to check your thing about all the current place that we manufacture okay? And so can you answer that, please?
Sebastien Bourassa
So, first, Nick, we are okay, we try to give some increase to our different staff in a different location. That’s always part of our budget. And yes, I think we took care of our employees, and we have that has helped us to fill some of the gap where we have maybe some open position. And after that, 2022, maybe take, yes, we had some maybe minor issue in two, three places, but for 1 or 2 weeks. But as of right now, the best of my knowledge, all our location are healthy and they are all working.
Nick Agostino
Okay, thanks, guys.
Marcel Bourassa
Okay, thank you, Nick.
Operator
[Operator Instructions] We will go ahead and take our next question from Zachary Evershed with National Bank Financial. Please go ahead.
Zachary Evershed
[Foreign Language] So I was wondering if you could give us some insight into how the dynamics change in accessibility when we start to see interest rates rise? Do you see any issues on the residential side of things?
Marcel Bourassa
My answer is no. No, no, no. Not at all, okay. First of all, okay, they want to be at home, okay. They want maybe to buy an elevator, as I mentioned before, the backlog of elevators has never been in all my life, okay? So great again. So I see that the people, okay, work and work very well okay passing okay, some time to be in the office and some time at home. Do you have something to add maybe, Nicolas?
Nicolas Rimbert
No, Zach. I mean I would say the products that we offer are more necessary as opposed to an extra deck that you might put on the back of your house or something. I mean if somebody needs mobility in their home, whether it be a stairlift or a platform lift or what have you. I do think you see that it’s a priority spending. Most of these individuals, it is private pay. So, I mean whether it would be from their own cash or maybe they have a line of credit that they tap. So, I would say no, in the current environment with what we are seeing in terms of interest rates on the horizon, again, I am not an economist. I don’t want to predict where they might go. But for the moment, we don’t see an impact. And again, given the kind of the necessity of these products for these individuals to maintain their mobility, it is the priority for them. So, as Marcel mentioned, we don’t see a big impact given the current interest rate environment and where it might go.
Marcel Bourassa
Yes. Congratulations. Thank you. And congratulations to the Canadian Government, okay. I think during this crisis, okay, they were very good, okay, to push some money in the consumer in the question. So, it was hard the last 2 years, but people have some – they don’t have some cash. So, they have a lot of project, and it’s why I see this year would be a great year. And maybe it’s very good to see that that we will be in the road of key to make our $1 billion in sales in 2025, or maybe a little bit earlier. Yes. Thank you for the answer.
Zachary Evershed
Thank you very much. And then for my second question, can you give us an update on your outlook and objectives for the Vuelift, please?
Marcel Bourassa
On Veulift, that’s an interesting question, okay. And a good guy to answer that it will be Sebastien. Just add a note, that Handicare is very excited about selling the Vuelift in Europe. And they already begin to sell that and the billing specifically is there. First of all, you are in a house and you are accessible on two or three levels. And it’s not something that is hiding in the corner or can put that at the center of a room and that’s an art. And it works quite well. Maybe, the price is not affordable for everyone, but we have a kind of people in the society. So, the people who don’t want to have that, maybe they will take a regular elevator. So, I see that the future of this product, and that’s good as it’s why our growth will be there and better because this is a product okay that we will sell more and more each after year. Because the people begin to see that. What is important, the architect around the world, know more about Savaria, know more about this fantastic project. So, Sebastien, yes, do you have something on that?
Sebastien Bourassa
Yes. So, yes. So basically, Vuelift, remember, it’s always our flagship product where – where we do a lot of marketing effort on the Vuelift. And it’s always hard to evaluate also the exact suspects on the Vuelift because it has a big influence on the other home elevator. And as Marcel said, our backlog is very nice on the Home Elevator. I guess part of it, the numbers of leads this drive the Vuelife. And now for sure, we – and it takes time for Vuelift project some time. Yes, because the negotiation might be a bit faster, but put new. We have to put a Vuelift just at the end of the construction. Yes, now we have some demo in our own offices in Swiss and Germany and UK. And I think Garaventa Europe, because we started a bit like 1.5 years, 2 years ago, start to have an interesting trend, especially in Germany. And now we have trained a team of Handicare and to use that to the dealer Handicare, and this is something that we will expect together have very nice growth with Vuelift in Europe. And if you remember, I believe Vuelift is got compliant for Europe. So, we did that 2 years ago. So, there is no reason why we cannot accelerate our growth of Vuelift. And I think the team Handicare put a lot of efforts also on the marketing and training upon Vuelift.
Zachary Evershed
Thank you very much.
Operator
Thank you. We will take our next question from Sepehr Manochehry with Eight Capital. Please go ahead.
Sepehr Manochehry
Thanks and good morning. On the Patient Care segment, can you characterize the thinking behind the change of name from patient handling and does it open you up to new product lines?
Marcel Bourassa
Okay. I am very happy that you touched this segment, that it is because [indiscernible]. So, yes, that’s a good question. And you will see that we make – will explain that we will make some change that will change this division in this year. So Nicolas?
Nicolas Rimbert
Sure. I wouldn’t read too much into the name change of patient care to patient handling, essentially Span or I guess prior to Handicare was the big driver of our legacy patient handling business. Again, more in the pressure care, so in terms of those therapeutic support services and the bed frame. So, we had the pressure care side. And then with Handicare, obviously, more in the safe patient handling with their lift products we thought that patient care was maybe a better name that encompasses the entirety of that group. The opportunities, I think in front of us for patient care won’t necessarily come from the name change, but really from certain changes that we have made internally to that organization. Again, Handicare brought with us a very, very strong team. And then again, combining that with Span as well as we brought on board a new commercial lead back in the fall, who is really kind of spearheaded much of the integration that’s going on, on kind of the sales strategy, the pricing strategy or product rationalization that’s ongoing. So, I think those are more of the initiatives that we are doing that are going to have an impact on that division. Unless you have any other further questions as it relates to the name, I would say don’t read too much into it.
Sepehr Manochehry
Understood. I was – I just saw patient care, I thought maybe you are broadening maybe into wound care products, because I have been reading into kind of pressure products that you had and some of the patient handling solutions you could go into?
Nicolas Rimbert
I think right now, our main focus is we have a good portfolio of products of lifts, of slings, of bed frames and mattresses. And again, with the team we have around us, it’s a question of I guess better focused on what we have and getting the best out of our current product portfolio, rationalizing our product portfolio in many cases where there is some overlap between the Span and the Handicare divisions. And then from there – yes, there could be an opportunity for us to look to add new products. But right now, I think we have a good mix with what we have now.
Marcel Bourassa
Can you speak a little bit about our guy in Magog that handled this division right now for us?
Nicolas Rimbert
Yes. Pat. So, a little shout out to Pat. So yes, Pat joined us back in the fall, again, 20-plus odd years of experience. On the sales side, on the product side, he joins kind of our two other leaders within patient care, you filled [indiscernible] who heads up the I guess, the sales front and then less [indiscernible] there in Greenville, South Carolina for more of the, I guess the operational side of things, in charge of the factories both in Greenville, but also in St. Louis and Waynesville. So, Pat really when he came onboard, he has kind of taken all the commercial activities under his wing, under his direction there. And really, focusing first on – we have these price increases that we have passed on over the past several quarters to combat some of the inflationary pressures that we have been facing. So, passed on a deep dive and do all of our products. So, looking at all that we offer both on the span side, the Handicare side and for Magog there on the Savaria side. looking at all of our products, all of the prices and making sure that we are selling the right products at the right price to the right people. So, that’s really what he has been, I guess, his mandate has been since the start. And again, it’s having, I would say, a very positive effect on the team. I think everybody is kind of buying into this one Savaria, if you can call it that, as it relates to patient care. So, it has been instrumental, and we are very happy and fortunate to have him onboard and the rest of the team onboard, and we feel very confident about where we are going with that division.
Marcel Bourassa
Understood. Yes. Just to add on that. You will see that we – the margin was not satisfied at how, I cannot work with margin like that, okay? So, Pat is onboard, he is working hard, with his friend, his colleague. And you will see that we will produce EBITDA at the right ratio in ’22. And we will put to have a very good ‘23 in turn, of EBITDA number. That’s something to have an EBITDA, but we have to be at the right ratio. That’s why I focus it to be at 20% by the end of 2025. I focus on that my team work hard and we will deliver.
Sepehr Manochehry
Understood. And that rate ratio for you is – where is that rate ratio for you right now basically kind of now?
Marcel Bourassa
That’s a good thing, okay. But I think that the excess EBITDA turn, and will turn on ’23. And I think we will be around 20, on this patient handling. So, it’s – we are very up to this very optimistic about to deliver the apace. First is thing with the people motivated and have the right products. We need that. And we have this combination.
Sepehr Manochehry
Understood. And I did notice there was a slight reduction in your staff from 2,300 to 2,250. Is that just a function of increased automation, or are you looking at – and you also mentioned 2,000 staff. Is that just you are rounding, or are you looking at some staff reductions as you increased automation, I guess?
Marcel Bourassa
Okay, over the years, our staff is very stable. It’s a question they like to be with us. And for sure, we have a company that will put our employee at a very big priority or maybe we pay them a little bit too much. But the people like to work at Savaria. And me, I am a guy that go in the shop, now a little bit less, but my people right now, Sebastian and the others. We go in the shop and we speak with them. It’s why is just going higher but we don’t have a lot of change right now. For sure, Sebastien can add something. They have an interim income about the current lift that we make from Savaria prominent number we make, has to make to deliver 150, 200 by the end of the year a month, with how many people Sebastien?
Sebastien Bourassa
For sure, like we are always working on our productivity and to bring the Handicare product here for the curve is they make a big change in terms of productivity out per person. Basically Handicare is 4x more productive in terms of when it is time versus Savaria to manufacture curve Vuelift. And I think, Steve, maybe you want to comment a bit on the total number.
Steve Reitknecht
Yes. I was just going to say, Sep, it was 2,300 was the initial estimate based on our first consolidation with Handicare. We have just fine-tuned the number down to 2,250. So, 2,250 is the number, the number of employees we have, there haven’t been any significant changes in headcount. It was more just fine-tuning.
Sepehr Manochehry
Understood. Thanks for the answers and I will hop back in the queue. I appreciate it.
Operator
And we will go ahead and take a follow-up from Derek with TD Securities. Please go ahead.
Derek Lessard
Yes. Just a few follow-ups for me. It looks like excluding the government assistant program, you were actually able to keep your margins flat year-over-year. You did mention things like shipping costs in particular. So, I was just wondering how we should be looking at your margins progressing through 2022?
Marcel Bourassa
Talking about the gross margin, okay. I think with the increase of the price that we have done, we have to be fairly and less, can live and be happy with the price that we get. So us, we will be very happy to reach the gross profit of 35%. So, I think we will reach that, by the end of ‘25. And that’s a base for us. And we have the people, we have the territory. We have the number of dealers don’t forget we sell there, but we sell the majority of our shelves through dealers. So, we like to work with them, and they are good with Savaria for so many years. And what is critical the dealers we have roughly, the number of dealers that we have a couple of years ago – many years ago, because they don’t change. They are happy with us. And what is important, we are nearly continuity that can say, buy with us and we have all the projects to cover residential and commercial from the curve, the straight to the vertical, to elevators, to the something to be that give to your customer an accessibility to the Vuelift. That’s great. So, we have our commercial, residential, at the same rate, that’s major. And we bring that this so we have some more to do it that we made need to code in Europe. Some we are working on that right now. But it’s important to arrive down there and make some modification because the customer in Europe and North America are different a little bit on [indiscernible]. So, we will work on that, but that’s a major to offer to a dealer the complete client. So, they don’t have to look at other places, just buy at one place. Sebastien, you have something to add?
Sebastien Bourassa
No, I think that was a good answer. Maybe Steve, do you want to add something?
Steve Reitknecht
Just, Derek, specifically about the underlying margins, I mean yes, there was a lot of pressure this year from decreased user as I mentioned and you mentioned. I think when we highlight the increased shipping costs, which were significant in the year, I mean it just goes to show how much better of a year we could have potentially had. We finished the year at $100.3 million of adjusted EBITDA, and we saw significant increased freight really from the end of Q2 through the end of the year. And that’s – when we look at 2022 and beyond, where we have planned accordingly to incur similar freight rates. So, yes, we did hit 103 – it could have been – sorry $100.3 million. It could have been a decent size bigger for works for additional freight costs. But we did incur them, and we are expecting them to continue in the future. So, hopefully that gives you a little bit more color.
Derek Lessard
Yes. I think so you are – but you are expecting high rates, but flat year-over-year. You are not expecting them to grow?
Steve Reitknecht
Freight costs. No, we are not expecting it to grow on a sort of per shipment basis. But obviously, as our business ticks up, we are looking at different things, including the manufacturing of the curve stairlifts brands, which has a positive impact on freight. So, there are changes. But on a – when we look on a per container basis or per shipment basis, we are planning on it continuing at the current level.
Derek Lessard
Okay. That’s helpful. Another one for me is I was wondering if there is – if you are seeing maybe any initial impacts on the European business? Maybe just given the conflict that’s going on in the area?
Marcel Bourassa
Not right now. Sebastien you are in touch with them, better than me. But with my take, when I speak it clarity, it seems that it’s easy. But we wish that it will finish this work. But Sebastien, you have some update to give.
Sebastien Bourassa
No. Again, I would say it’s very unfortunate, but a customer, we did not have really sales over there, so there is no impact. But in terms of supply chain so far we have not been impacted, but we are monitoring that very closely because we have a sales office in Poland. And there is a lot of energy going here. So, that’s something that on the long-term could have impact what we are monitoring.
Derek Lessard
Okay. And maybe just one last one for me in terms of the housekeeping for Steve, you talked about strategic investments and inventory. Just wondering what your expectations for capital are this year? And maybe along the same lines, your CapEx in 2022?
Steve Reitknecht
Yes. Well, specifically looking at working capital and within that on the inventory piece, we did see a sizable increase in 2021, as we have talked about, that was intentional to buffer ourselves against supply chain challenges and very – we did see various challenges throughout the year. Vancouver floods were just one of them. Going forward, for 2022, we have sufficient inventory on hand right now. We are not on a dollar basis. We are not trying to increase that. We are trying to more redeploy that and keep the investment in inventory relatively flat for 2022. That’s our goal. On the CapEx side, we are being diligent with CapEx. Our spending estimate for 2022 is sort of in that 2% to 3% run rate that we have historically had, and that includes some investment in some of our facilities related to some of these projects that we are talking about, whether it’s stairlift manufacturing in different cities or other investments. So, we are being very critical on CapEx, and that is just going to show how focused we are on debt deleverage.
Derek Lessard
Thanks everybody.
Steve Reitknecht
Thank you very much.
Operator
And with that, that does conclude our question-and-answer session. I would now like to turn it back over to our speakers for any additional or closing remarks.
Marcel Bourassa
So, thank you very much, my dear. So, I think that was a great call and thanks to my team. See you in three months.
Operator
And with that, that does conclude today’s call. Thank you for your participation. You may now disconnect.
Marcel Bourassa
Thank you.
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