Have a $26.00 target. GLTA
Savaria Corp.
(SIS-T) C$16.80
Solid Top Line Performance Offset By Extra Savaria One Costs
Event
Savaria reported Q4/23 revenue of $217mm, a modest beat to TD/consensus
estimate of $214mm/$215mm. Adjusted EBITDA (including ~$2mm in Savaria
One Costs) was $33.1mm, below TD/consensus of $35.2mm/$35.5mm.
Management reaffirmed its 2025 targets of $1bln revenue and 20% adj.
EBITDA margin.
Impact: MIXED
The Accessibility segment delivered another quarter of strong top line
performance, highlighted by ~10% organic growth and a robust backlog despite
accelerated order completion. While Patient Care is an inherently lumpy business
(and up 3% in FY2023), it reported the first organic decline since Q1/21 which we
believe, together with weaker-than-expected EBITDA (mostly on higher Savaria One
costs), could lead to modest pressure on the shares today (which are up 37% from
November 2023 trough). Other highlights include:
Accessibility: 9.5% organic revenue growth (TD est: 6.5% including forex)
driven by strong demand across residential and commercial sectors, pricing, and
cross-selling synergies with Handicare. Despite improving lead times (especially
in Europe), robust demand stemming from new construction projects in North
America supported a robust backlog. Better cost absorption from higher volume
and price increases drove an ~25bps expansion y/y in adjusted EBITDA margin
(albeit < 120bps TD est.).
Patient Care: 5.9% organic revenue decline (TD est: 4.0% growth including
forex) given the uncertain timing of orders, reduced year-end government
spending and the lapping of a very tough (i.e. ~26% two-year stacked growth).
That said, the backlog remains healthy and despite the top line decline, adjusted
EBITDA margin expanded by a substantial ~300bps (> 250bps TD est) owing
to better mix and pricing.
Strong balance sheet with ample liquidity: Leverage fell to 2.07x (down from
2.28x in Q3/23), with ~$223mm available in cash and credit facilities.
Divestiture of Adapted Vehicle manufacturing businesses. Post-quarter,
Savaria closed the sale of Van-Action and Freedom Motors on February 1, 2024.
We estimate that the two businesses represent ~$22mm of annualized revenue.
The conference call is at 8:30 a.m. today (which can be accessed here). We will
look for more colour around the underlying demand trends for Patient Care, and any
initial progress under the Savaria One initiative.