Savaria Corporation (SIS.TO), a global leader in the accessibility industry, reported mixed first-quarter results for 2024. Despite facing a revenue shortfall with a 1% decrease compared to the previous year, the company achieved record gross profit and an increase in EBITDA.
Savaria's net earnings rose to $11 million, up from $6 million in the prior year. While the company did not provide specific guidance for fiscal 2024, it remains committed to reaching its ambitious target of $1 billion in sales and a 20% adjusted EBITDA margin by 2025.
Key Takeaways
- Savaria reported a slight revenue decline to $209.4 million in the first quarter.
- The company saw an EBITDA margin of 18.5% and net earnings of $11 million.
- North America accessibility segment grew by 11%, while Europe accessibility declined by 3.4%.
- Savaria's net debt stands at $271.1 million, with a net debt to adjusted EBITDA ratio of 2.03.
- The company's Savaria One initiative is contributing to improved profitability and EBITDA.
Company Outlook
- Savaria aims for $1 billion in sales and a 20% adjusted EBITDA margin by 2025.
- Expansion efforts in Mexico and operational excellence improvements are ongoing.
- The company is focusing on the Savaria One project and smaller tuck-in acquisitions over the next two years.
Bearish Highlights
- Sales declined in the Vancouver division in Canada and slightly in Europe.
- No fiscal 2024 guidance was provided.
Bullish Highlights
- Positive EBITDA improvement in Europe and North America.
- Record gross profit and margin achieved, with a 2% increase in EBITDA.
- Net finance costs decreased, and cash flow from operating activities rose.
Misses
- Revenue fell short of expectations with a 1% decrease from the previous year.
- The Europe accessibility segment experienced a 3.4% decline in revenue.
Q&A Highlights
- Savaria is not significantly exposed to market prices due to its procurement strategy and RFP process.
- The company is focused on reducing material costs and improving supply chain efficiency.
- Savaria expressed confidence in their future performance and satisfaction with Q1 results.
Looking ahead, Savaria Corporation is poised to strengthen its market position through strategic initiatives such as expanding its dealer network, enhancing supply chain efficiency, and introducing new products.
The acquisition of Matot and the potential for cross-selling opportunities are also expected to contribute to the company's growth. With a strong focus on operational excellence and strategic acquisitions, Savaria is optimistic about achieving its long-term financial goals.
Full transcript - None (SISXF) Q1 2024:
Operator: Good morning, afternoon, and evening. My name is Norma. I'll be your conference operator today. At this time, I would like to welcome everyone to Savaria Corporation's First Quarter 2024 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. The three speakers for today's conference will be Sebastien Bourassa, President and Chief Executive Officer, Stephen Reitknecht, Chief Financial Officer, and Jean-Philippe De Montigny, Chief Transformation Officer. After the speaker's presentation, there will be a question and answer session. [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 May 8, 2024, with respect to its first quarter, 2024 results. Thank you. Mr. Bourassa, you may begin your conference.
Sébastien Bourassa: Thanks, Norma, and good morning, everyone. So today, I will start with a small recap of our first quarter results. Steve will update us with our financial section, and JP will update you on the progress of the Savaria One, and we're going to have a smaller Q&A session at the end. So first of all, overall, revenue growth in Q1 was below expectations. First, we lost some sales with the diversity of our Vancouver version in Canada. Europe has a small decline of 3.4%, but we use later that they had a positive EBITDA improvements, so good job on that. And we are going against a weak second quarter of 2023, so we're expecting to have some growth in the second quarter to bring us back to the normal point. Patient care had a flat first quarter, but we are again, a strong first half of the year in 2023, with a weaker second half, so we're expecting some growth for this year. It's part of Savaria One, and remember, in the last two years, we have increased our sales by 30% in that segment. Positively, in North America, we saw growth of 11% in the first quarter. We have deploy dealer-partner program, name Access Plus. In North America, the reception was very good, and we had the best quarter ever in terms of booking for Garaventa and Savaria in North America, so quite positive. So ups and downs in the first quarter, but in the long-term, we are still very confident in our ability to grow the business to $1 billion by 2025, with the aging population, a unique value proposition for the one-stop shop and the wide range of product that we have, with the expansion in R&D, with new products, and bringing some new existing products in Europe. I think we have all the tools in our hands to succeed. Overall, Savaria has remained a very attractive business for a dealer, with an all different market, the one-stop shop, the wide range of product we have, a global footprint, and a vertical integrated supply chain. We continue to expand our build-out in Mexico. Now we have 75 employees, which will be there to support the next generation of manufacturing, improve our costs, bring some resilience to a supply chain that puts us in good position. Our operation continued to improve in all the factors in terms of safety, quality, and throughput, so quite positive. And that brings us a bit to the next section, which is the EBITDA improvement by 2% in the first quarter. This is 16.6%. And [indiscernible] weakest quarter of the year, and that shows some very positive signs of operation excellence that we are developing for a Savaria One program. Improvement of 2% in Europe going from 10% to 12% with lower sales, so that shows some sign of improvement with a Savaria One, and this team is working very hard on this, and JP is going to explain it in this section later. North America accessibility, improvement of 2% going from 17.5% to 19.8% due to higher output in Brampton, Surrey and good performance in our direct store, so very happy with that. Patient care went down to 18.5%. I think this mainly due to the product mix and the worst sales, but not very far from our target of 20%. As discussed in our last Investor Day, our target by 2025 is to be a company of approximately $1 billion sales at 20% EBITDA, and it will be possible with a Savaria One program. Our results in Q1 show that we are moving in the right direction. Savaria is also very well-positioned with its balance sheet. We continue to do some small tuck-in acquisition to reinforce our portfolio to continue to improve the margins. In the first quarter, yes, we diversed our van conversion in Canada, but we have replaced some portion of the sales with Matot, Dumbwaiter, that's a good start from April, and that's a very good example, small tuck-ins to bring some new products, to continue to be the first choice for a dealer and be able to integrate that in our supply chain to bring some synergy. Very important, we had a good quarter in terms of cash generation, which Steve would talk about it into details, but I want to highlight that we have generated cash from operation while we are going to business, and this is where we want to be. Finally, I would like to thank all our employees, our dealers, our supplier, and our customer for the success in the first quarter. As I travel all the world to visit different sites, I'm very always impressed with the good idea from employees and I thank them for all their participation in this successful company. I think our employees appreciate the effort that we are getting and that some direction on where to go, their participation is good, and we saw that in our last engagement survey in the company. So, in closing, keep in mind that Q1 is tend to be the slowest quarter of the year. While we have a revenue growth challenge, we are quite pleased with the profitability and improvement in our margins. Steve?
Stephen Reitknecht: Thank you, Sebastian, and good morning to everyone on the call. I'm excited to share some remarks regarding our Q1 2024 results. Starting off, some key highlights for the quarter include strong EBITDA margin improvement driven from gross margin improvement, North American accessibility revenue growth of 11%, and strong cash generation from operations including from working capital in our seasonally weakest quarter. So, for the quarter, we generated revenue of $209.4 million, a decrease of $2.2 million or 1% versus last year. The decrease mainly came from the divestitures of Van-Action, Freedom Motors, and the Norway operations, partially offset by organic growth of 2.6%. We also experienced positive foreign exchange fluctuations. I'm pleased to report that the corporation delivered improved gross margins not only over Q1 of 2023, but also higher than any quarter in all of 2023. We delivered record gross profit and gross margin of $75.4 million and 36% compared to $72 million and 34% in Q1 2023. The increase in gross profit of $3.4 million is explained by better gross margins in both of our segments due to favorable product mix, improved pricing, favorable cost of material as well. As Savaria One continues to be the major driving force toward our targets, we incurred $5.3 million for strategic initiative expenses in the quarter, in line with previously stated expectations. Adjusted EBITDA and adjusted EBITDA margins finished at $34.7 million and 16.6% compared to $31.2 million and 14.7% last year. The increased profitability is mainly explained by the increased gross margins as a result from the effective realization of our ongoing Savaria One initiatives, and JP is going to speak to this shortly in more detail. Now looking at our segmented results, revenue from the accessibility segment was $160.4 million, a decrease of $2.4 million or 1.5% compared to last year. The decrease was mainly related to the divestitures. In addition to the execution of some of our pricing initiatives and pricing optimization, we saw strong demand in both residential and commercial sectors, partially reflected in the organic growth of 3.3%. Adjusted EBITDA and adjusted EBITDA margin for accessibility stood at $27.6 million and 17.2% compared to $24 million and 14.8% last year. The increased profitability was mainly due to improved gross margins coming from favorable product mix, improved pricing and favorable cost of materials for both regions in line with our cost efficiency focus. The accessibility backlog remains strong and grew slightly versus where we ended the year. We consider our backlog level to be healthy as we have a good mix between short lead time products such as stair lifts which will ship out quickly and longer term home and commercial lifts which will be shipping out within a few months or longer. To provide some further color on our regions, revenue from our North America accessibility region increased 11% over last year. The adjusted EBITDA margin rose to 19.7% and improvement of approximately 200 basis points versus a year ago. Revenue from our Europe accessibility region declined 3.4%. The backlog remained stable. Adjusted EBITDA margin improved here to 12.7% also an increase of approximately 200 basis points over last year. Switching gears to discuss our patient care segment. We saw revenues for this segment reached 49 million for the quarter, an increase of $0.2 million or 0.4% compared to last year. We experienced healthy traction inside the United States which led to increased revenues while we saw a decrease in Canada explained by certain large construction projects delivered in Q1 2023 not repeating this year as well as reduced government spending. As a reminder to everyone on the call, our patient care business is driven in large part by project based sales which can be lumpy from time-to-time and throughout the quarter the patient care backlog remains stable. Adjusted EBITDA and adjusted EBITDA margin for patient care stood at $9.1 million and 18.5% compared to $9.8 million and 20.1% last year. A decrease in both metrics was mainly due to an unfavorable product mix on certain projects versus last year and higher selling expenses partially offset by pricing initiatives and pricing optimization. We have communicated on previous calls that Q1 and Q2 of 2023 were exceptionally strong and likely not to repeat in the short term. Our EBITDA margin of 18.5% this quarter is higher than what we saw in the previous two quarters being Q3 and Q4 of 2023 and is a very good start in our progress towards their target of 20% EBITDA margins. On a consolidated basis, net finance costs were $3.1 million compared to $7 million last year. Interest on long-term debt decreased by $1 million primarily due to the reduced balance of debt and we also experienced unrealized movements on financial instruments. Net earnings was $11 million or $0.16 per diluted share for the quarter compared to $6 million or $0.09 per diluted share last year. The increase in net earnings and net earnings per share was mainly due to the higher adjusted EBITDA and lower net finance costs partially offset by higher net income tax expense and strategic initiative expenses. The higher net income tax expense resulted from the bottom line increase to the increased profitability but does represent a slight decrease in our effective tax rate from 24.8% for all of 2023 to 24.3% for the current quarter. Turning now to capital resources and liquidity in more detail. For the quarter cash flows related to operating activities before net changes and non-cash operating items reached $23.8 million compared to $18.1 million last year, explained by higher EBITDA generated by the business. The net changes in non-cash operating items increased liquidity by $2.7 million compared to a decrease last year of $2.1 million. The increase was mainly due to decreased account receivable and increased payables offset by slightly higher inventories. As a result, cash generated from operating activities in Q1 stood at $26.5 million compared to $16 million last year, a very large increase of over $10.5 million. Our DPO and DIO measures improved versus last year end while DSO remains stable. In line with our efforts to optimize our supply chain and working capital levels across the business, we continue to focus on improving working capital as we grow the company. Cash flows used in investing activities was $2.4 million for the quarter compared to $7.7 million last year. We dispersed $3.8 million for fixed and intangible assets compared to $4.5 million in Q1 2023. Since some investments were delayed to future quarters, we are expecting capital expenditures to stay in our historical range of 2% to 2.5% of revenues for the entire year. We also did receive $6.4 million from the divestments this quarter versus $12.4 million last year. Cash used in financing activities was $29.6 million for Q1 compared to $6.3 million last year. The variation is primarily explained by a reimbursement of the evolving credit facility of $13.5 million following the inflows coming from operations and divestments compared to a draw of $8.5 million last year. Looking at net debt, as of March 31st, our net debt position was $271.1 million in the ratio of net debt to adjusted EBITDA stood at $2.03 in comparison to $2.07 at the end of 2023. Looking forward with regards to the guidance for the future, as previously stated, Savaria is not providing guidance for fiscal 2024 as we focus on the achievement of our targets of approximately $1 billion in revenue and approximately 20% adjusted EBITDA margin by 2025. The global team is focusing on delivering these 2025 objectives and it remains difficult to pinpoint exactly where we are going to finish 2024 in the quarters therein. Savaria's future prospects are promising driven by strong market demand, the progress of Savaria One, and potential tuck-in acquisition opportunities that will enhance our market position. And with that, this completes my preparatory remarks and I'm going to turn the call over to JP to provide further details on how we're progressing with Savaria One.
Jean-Philippe De Montigny: Thank you, Steve. Q1 2024 was the first quarter where we saw the impacts of Savaria One. As one can see in our financial results, our adjusted EBITDA increased by approximately $3.5 million versus same quarter last year on $2.2 million less revenues. This is quite a success, especially given Q1 tends to be our slowest quarter in the year. Outside of divestitures, those results can largely be explained by initiatives implemented during Savaria One. Given our Investor Day was just a month ago and the examples shared that they are still recent. Let me point to a few examples and link those to our financial results. Our accessibility sales in North America were up 11% versus last year, which is in great parts due to our efforts to increase the throughput of our factories in Surrey and Brampton for our best selling products, like the Eclipse, for which we closed 8.3 units per day in average last year in this quarter and 10.5 units per day in this quarter in 2024, which is an increase of about 25% year-over-year. Also in North America, in parallel to growing our top line, we made a number of changes to our commercial terms, which increased our contribution margins. Those included the launch of the new dealer partner program, also adjustments to pricing, and various commercial tactics that improved our mix and average margins. Note that given the debt of our backlog, we only got partial benefits from the price related adjustments in Q1 and expect those to really materialize in Q2. In Europe, our EBITDA margin increased from 10.8% to 12.7%, while revenue is declined by 3.4%. So we generated a higher EBITDA in absolute dollars on a smaller top line. Improving profitability has been our priority within Savaria One in Europe, given the lower EBITDA margin of that region. We have plans to stimulate growth and cross-selling, but chose to prioritize actions that will improve our profitability, even at the expense of revenues in some cases. This improvement in profitability is the result of a mix of commercial and operational changes. I shared during our Investor Day an example of how changing our commercial terms in one business segment in the UK improved our margin. This is just an example, as we have been reviewing all the lower margin segments of the business and developing plans to improve their profitability. We also made efforts to reduce costs in our factories and within SG&A. For example, I shared how we reduced the labor costs in Kingswinford to moving to one shift and how we increased the recovery and reconditioning of units in [indiscernible] to our reconditioning initiative there. We also reduced reliance on temporary labor, agency workers, and reduced the administrative personnel in Europe over the last quarter. Those initiatives, as well as many others of that nature, enabled an almost 2% margin expansion on lower revenues in Europe. In patient care, our results show flat sales year-over-year in Q1 and lower margins. While we would prefer stronger results, we knew Q1 and Q2 of 2023 were exceptional in the patient care division. We did expect the impact of our Savaria One efforts to take longer to materialize in that business as well. In fact, at this stage, our plan consisted mostly of investments in strengthening sales and marketing activities, which we expect will accelerate overall through the backend of 2024 and 2025. So we did not expect Savaria One to impact sales at this point, but knew it would increase our cost in Q1, which is something we see in our results. Finally, as shown during the Investor Day, we are very active in addressing our cost of goods sales through procurement and supply chain optimization initiatives. Whilst we have secured millions of dollars of savings already through RFPs and contractor negotiations, we saw almost no impact from those savings in our Q1 results given the time needed for us to work through our stock of parts. Yet, we believe that the fact that we were actively sourcing and negotiating prices for many of our goods and services categories enabled us to keep prices constant and even get some concessions. So as a result, within our accessibility business, for example, we saw our material cost as a percentage of sales declined by 2%. At the end of Q1, as per our calculations, we were on track with our plan both in terms of quantity of initiatives implemented and their financial impact. While this is not the form to extend too much on it, I would also like to mention that through Savaria One, we are continuing to improve our systems, our processes, we are strengthening our organization and building a path to continue to grow past the billion dollar in sales. In that regard, our organization has mobilized more than ever, and as Sebastian mentioned earlier, we do measure the engagement of our employees and just completed an engagement survey now that shows the material improvement versus when we started Savaria One. I would like to thank my colleagues as well as all the managers and employees of Savaria for their leadership, their contribution to our success, and for driving the hundreds of initiatives that are making us progress towards our goal with Savaria One. Finally, I just wanted to remind us that the gains we are accruing by implementing Savaria One initiatives are recurring in nature, that we continue to implement improvements every month as well as add new ideas to our initiatives pipeline every week. With that, we remain confident in our ability to reach our goal of 1 billion in sales as well as approximately 20% of EBITDA in 2025. Thank you for your attention. Let me turn it back to Sebastian.
Sébastien Bourassa: Thank you, JP, and thank you, Steve, for the color on Savaria One and on financials. I guess, Norma, we are ready for some questions.
Operator: Thank you. [Operator Instructions] Our first question comes from the line of Kyle McPhee with Cormark Securities. Your line is now open.
Kyle McPhee: Hi, everyone. On the accessibility segment, organic revenue growth in North America was very strong, but Europe was down. Can you provide some more detail on the source of the decline in Europe and whether or not this dynamic will repeat a few more quarters before it's left?
Sébastien Bourassa: Good morning, Kyle. For sure, from one quarter to the other, we are judged on the financials, so it's always a bit difficult. But if we start with North America, yes, we have said in the last year or two, the booking has been very strong, and maybe in the past, we had some issues in our factories with some of the output, but it has been a core focus on the Savaria One to improve the flow in our factory, improve the efficiency, so I think we are starting to see some color out of it, so quite happy with that. And in Europe, again, it's just one quarter. Right now, we are making a lot of effort on a Savaria One, on a product-mix pricing initiative, dealer initiative. The good news is we are going against a week, a second quarter in Europe, but I'm expecting things to be back to normal after six months in terms of growth, and the teams didn't know that we need to go to one billion of sales, which imply 8% to 10% organic growth, so going forward, we're going to see some growth as well in Europe, Kyle. And as we bring some new products as well of Savaria, because right now, we are mostly a sturdy and inclined platform company in Europe, as we bring some more vertical platform and later in the future, that should help us also to have some organic growth, so I'm confident about the future.
Kyle McPhee: When you say you're changing the mix in Europe accessibility, are you implying that maybe you're giving up some sales that's lower-margin stuff, and that's part of the reason we're changing the margins to shoot way up? Like are you passing on certain sales and that's manifesting as that revenue decline in Q1?
Steve Reitknecht: For sure. Again, since it's not just about growth, growing a top line, it's also taking care of the bottom line. Yes, we're reviewing which channel, which profitability, and that can imply some decision, some choice that we have to make.
Kyle McPhee: Got it. Okay. And then, again, on accessibility, the big 11% organic growth for North America, was there any new price gains feeding that organic growth? Or is it still just the price that I think started to kick in Q2 last year that hasn't been left yet?
Sébastien Bourassa: Sure. For sure, Kyle, you know our formula is always a big complex, right? We have different brands with price increase at different time. So yes, on North America, we did a price increase in the first quarter, but it goes a bit against serve, you're a good size backlog, so we're expecting to see some improvement on the margins more in the Q2 towards the price increase of last year. But price increase, now don't forget, it goes -- maybe against some additional costs that we have in the business. At one point, we cannot just increase the price of our customer, and we have to work also on productivity and efficiency to improve the margins.
Kyle McPhee: Okay. Is it fair to say, though, that 11% North American accessibility organic growth still included a good chunk from volume, or was it heavily weighted to price?
Sébastien Bourassa: It was mostly volume for the first quarter, yes.
Kyle McPhee: Okay. Thank you. That's it for me.
Operator: Thank you. One moment for our next question, please. Our next question comes from the line of Gabriel Moreau with Scotia Bank. Your line is now open.
Gabriel Moreau: Hi. So, like you said, Q1 is usually your weakest quarter, and EBITDA margin increase goes to 2%. So how should we think about the cadence of margin expansion to the rest of the year? I assume second quarter comps is easier given the ERP, but what about the second half?
Sébastien Bourassa: The tough question, Gabriel, okay, because again, we don't give guidance per quarter in terms of EBITDA margins. If we go in 2025, we want to be a 20% EBD company that's, we have been a crystal clear and our investor did as the mandate. I think as we go with the Savaria one, we know there's a bit of hockey sticks, we're going to get better as we go with the procurement, which takes a bit more time, the cost selling. So I think it's a new stage for us, 16.6, and I will expect that this year to the next quarter, hopefully we'll have the chance to beat that. But again, we've got to be careful. We're working on the mid-long-term target, not just on the short-term, and Steve, do you want to add color on the margins expansion.
Steve Reitknecht: I think you answered a very well question, and just to echo that point, I mean, we're focused on improving margin sequentially quarter after quarter to reach that 20% target in 2025. So we are expecting incremental growth over the coming quarters.
Gabriel Moreau: Thank you. And on the pricing, you said you did a price increase early this year. How does that compare to last year? And with the Savaria One, should we think about the pricing opportunity as more progressive to the year and maybe more dynamic?
Sébastien Bourassa: Again, we've got to be careful on pricing, because again, we have different brands, different products. So yes, we did some pricing initiative this year, approximately a 4% to 5% increase in different brands. But when you go after that pricing, sometimes you have some product that you sell at low margins, or you have to focus on the product that has to be a better margin. So it's a mix of all this and pricing initiative that we're working on, finding some new customer, some new segment, where there will be better opportunity. And again, the different brands of that, and then it's complex. We have a direct store, which has a longer vacuum and factory, so it's hard to pinpoint sometimes just in one quarter, and we cannot be just about pricing. It had to be a mix of everything right.
Gabriel Moreau: Thank you. That's very helpful.
Steve Reitknecht: Thank you.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Michael Glenn with Raymond James. Your line is now open.
Michael Glenn: Hey, good morning. I'm just hoping, like the strategic initiative expenses of $5.3 million in the quarter, are you able to maybe just unpack that expense a little more? Is it cash, non-cash, does it include some restructuring? Just some additional details as to what's included in that specific line item.
Steve Reitknecht: Yes, sure. Good morning, Michael. I'll take this one. So the $5.3 in the quarter, this is in line with what we had previously stated at the investor day on April 9. So the $5.3 is mainly made up of consulting and other training costs. There's really no restructuring costs. This is consulting and training fees that we've incurred, and they're all cash costs, Michael.
Michael Glenn: Okay. And so those as, like if we think about the Savaria One program coming to an end at some point in the future, like those expenses just completely go away from the company?
Steve Reitknecht: Yes, exactly. So we are expecting what we saw in Q1 to continue for the remaining quarters of 2024, so expenses of roughly $5.3 million for the remaining quarters. These are one-time costs. These are not ongoing costs that are reflected in the underlying business. So just to reiterate, one-time costs for the benefits from the Savaria One program, that we're starting to see that JP's been talking to, that we've been talking to, the improved margins, gross margin and EBITDA margins, sales as well, those are all recurring in nature. So the fees for this project are all one-time, and the benefits are recurring. We're going to see those year after year of building on each other.
Michael Glenn: And as you progress through the undertaking, do you see, is there a potential that we could see some, like a larger restructuring charge roll through at some point in time as you analyze all of the businesses and all the plants and what's happening there?
Sébastien Bourassa: So far Michael, the Savaria One is about growth, it's about finding some initiative within the business. It's not a restructuring plant or just kind of project, CapEx, Steve mentioned before, we're running the same historical rate. So as of right now, we're not expecting a new significant change from the guidance we have provided before.
Michael Glenn: Okay, and then just on inventory specifically, Steven, like what do you -- when you look at where inventory was at the end of 1Q, like how should we think about the inventory opportunity within working capital for the business?
Steve Reitknecht: So there is an opportunity there, Michael. We finished Q4 with a large reduction in inventories, right? If we look at Q2, Q3, and then Q4. Q4, inventory really ratcheted down. Q1, it came up a little bit from where we finished Q4, but still lower than where we finished Q2 and Q3 of last year. So, we are very focused on inventory as part of our working capital, and then we are expecting to decrease that over the coming quarters. I mean, not only are we expecting a decrease, we're obviously expecting an increase in sales as well. So it's going to be very favorable when we're thinking about DIO metrics. For Q1, DIO was flat versus last year on higher inventories, and we're expecting DIO to decrease as well as inventory over the remaining quarters. So there's definitely an opportunity there, Michael.
Michael Glenn: Okay. Thank you for taking the questions.
Operator: Thank you. And our next question comes from the line of Zachary Evershed with National Bank Financial. Your line is now open.
Zachary Evershed: Thank you very much. Congratulations on the quarter.
Sébastien Bourassa: Thanks, Zach.
Zachary Evershed: So I'm hoping you can give us a little bit more color on the recent acquisition of Matot. What are the cross-sell opportunities there as you add dumbwaiter to your product portfolio?
Sébastien Bourassa: Okay. Very good question, Michael, and thanks for reading the news on Savaria . But yes, Matot is a very nice, small acquisition, a very long history, I think close to 100 years of making a dumbwaiter and material lift. Very well, good reputation. Fortunately, we have a small dealer network. Now we're coming to Savaria, we have a bigger dealer network, so there's an opportunity to bring that to some of our existing dealers. And some of our existing dealer examples may be bought by some dumbwaiter from the competition. So over time, we're going to try to convert that to buy from Savaria. And after that, I know we have a great supply chain. We're global. So I think, we'll be able to bring it into a supply chain. That's our target by the end of the year. We'd like to manufacture that in Toronto. So I think we'll be able to begin the one-step shop. We order it through one location, one sales rep to service, one technical department, one shipping, maximize the shipping fees, by shipping some of our products at the same time. So we have a great expectation for the future. And hopefully, the real product will continue to improve our margins. And Steve or JP want to complete something on that?
Jean-Philippe De Montigny: I agree with that.
Zachary Evershed: Good color. Thanks. Yes, just one more, actually. On the topic of easing material costs, you mentioned the commentary. Could you give us some more detail on the trends you're seeing there and in which raw materials?
Sébastien Bourassa: For procurement, JP, you want to go? Because that's a bit with the Savaria One procurement that we're working on.
Jean-Philippe De Montigny: Yes. So I can go into details of which categories, Zach, to be honest. What we see is two things, right? So to Savaria One, we are going through each category of spend, essentially, right? So we group our spend in different categories and we organize to go to market and source at the best price possible, those categories. So we're going through them one by one at the moment. But what we also saw, and we see this every day, right? So sometimes in this period, suppliers would normally come in and ask for a price increase. But then as they see that they're put in competition from RFP, they tend to back up from the price increase, right? And then to the opposite and help us reduce some prices. So we've seen this across many categories. But I cannot tell you specifically by material what the trends are, unfortunately.
Zachary Evershed: So fair to say that this is an internally generated reduction in costs rather than anything market-related?
Jean-Philippe De Montigny: Yes, To that point, we're not particularly exposed to market prices, right? Because many of the -- even the parts we buy, even the raw materials are transformed. So typically, I think the share of raw material exposure is relatively limited.
Zachary Evershed: That's it for me. Thank you. I'll turn it over.
Sébastien Bourassa: Thanks, Zach.
Operator: Thank you. [Operator Instructions] Our next question will come from the line of Justin Keywood with Stifel. Your line is now open.
Justin Keywood: Hi, good morning. Maybe just to follow up on the M&A commentary, there was mention of pursuing possible tuck-in acquisitions in the press release to replace some of the revenue from the divestitures. I'm just wondering, would these tuck-in acquisitions be margin accretive? I assume there wouldn't be a pursuit for fixer-uppers just given the goal of 20% EBITDA margins in the near term?
Sébastien Bourassa: Well, sure Justin. Again, we like to have tuck-in that will make sense for Savaria, a good product to bring, to offer more to a dealer something that we can maybe use as a global supply chain. A dealer network where there's no succession or we have not been good in one area. So all of this makes sense for Savaria. And yes, when it is vertical-integrated, that's usually at plus for two-in-four margins. Are we going to buy something one of those days that there's zero margins but we see a benefit to bringing to a supply chain in our product. Everything's possible. We'll try to focus on something that could bring some value immediately to a shareholder and the company.
Justin Keywood: Understood. Any indication of the amount of targets that you're looking at, potential multiples and size of transaction?
Sébastien Bourassa: Right now, we're very focused on the Savaria One. Okay, and I think we have enough on our plate for the next two years with the Savaria One, the one billion, against some small tuck-in. You know, in the past, we did sometimes two or three small tuck-ins. So could we digest that without the disruption to the business? The answer is yes. But the more midsize, big acquisition, I think it's not a focus for the next two years. In terms of pricing, I guess you do more than me. What kind of multiple do you usually pay? You can look at the history of our transaction.
Justin Keywood: Understood. Thank you.
Operator: Thank you. I'm currently showing no further questions at this time. I'd like to turn the call back to Sebastien Bourassa for closing remarks.
Sébastien Bourassa: Okay. Thank you Norma. So it was a shorter period of questions. So I guess it was with his own good delivering on the message, the JP and the Steve. So again, thank you very much for your comments, for following Savaria. I think it was a great first quarter. And you will see the next three quarters, we'll have some good things that we're going to deliver as well. Thank you, Norma.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.
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