Q4 2021 Stevanato Group SpA Earnings Call
Good morning, and thanks for joining us.
Remember that such statements are only predictions.
Tandem shareholder value.
The foundation for sustainable organic growth.
For the full year 2021.
Turning to slide six.
The evolution in our high value solution.
Panther beyond the primary packaging.
To slide eight.
<unk> to match customers' evolving needs.
Please turn to slide 12.
Profit and operating profit margins for.
Compared to last year.
Please turn to slide 14 for segment results.
And used to support our ongoing expansion plans.
Detours.
Yes.
In a nutshell, our balance sheet give us the flexibility to invest in sustainable organic growth by expanding our capacity to meet the long term demand dynamics in our core business with a strong financial position. We believe we have ample capital to address future liquidity needs and execute our strategic end.
Capital investment plans moving to slide 17 guidance they.
The company is establishing 'twenty to 'twenty two guidance that is framed by the strength and visibility of our backlog for the full year 2022, we now expect revenue in the range between 935 and 945 million adjust.
Adjusted diluted EPS in the range of 49 to 51 sensor adjust.
Adjusted EBITDA in the range of 248 million to 253 million.
Using the midpoint of revenue guidance, we estimate that we have approximately 75% of our forecasted revenue in the form of committed backlog.
Our guidance also assumes continued durability from Covid with expected revenue contribution in the mid teens as a percentage of total revenue.
Our guidance also considers the temporary edwin related to inflation and supply chain. We currently expect that revenue will be higher in the second half of fiscal year 2022, compared to the first half of the year.
This aligns to our industrial plows as we continue to bring more capacity online during the course of fiscal year 2022.
Thank you I will pass the call back to Franco model for closing comments. Thanks, Marco our 'twenty to 'twenty two guidance reinforces our belief that we can continue to deliver on our long term objective. We have earned a reputation as a leader in premium drag of packaging games and <unk>.
Having.
Serving as a vitally to the safety and the faculty administration all of our customers injectable treatments diagnostics tests and therapies, we have a relentless focus on driving cost up innovation R&D delivering high quality product offering scientific games.
Technical support and meeting market demands, we serve some of the fastest growing market segments.
We are integrated into the drug production delivery supply chain.
With favorable multi year take or pay with including pharmaceutical innovation aging population with chronic condition growth in biologics and biosimilars acceleration the Spanish of vaccination programs self administration of Madison and increasing quality stand.
Those tower regulation above all we believe that our strong reputation coupled with these favorable macro Atlanta, and our high quality suite of products position us well to benefit from continued demand and in turn deliver double digit revenue growth margin of Spanish.
And long term shareholder value operator, let's open up the line for questions.
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Our first question today comes from David Windley from Jefferies. Your line is open.
Hi, good morning, or good afternoon. Thanks for taking my questions I wanted to started with just a couple of kind of housekeeping type questions.
Mark I was hoping you could tell us what the.
The dollar value of the percentage of revenue from your easy fill products that you're not including in high value solutions.
Okay.
Yes, we are.
I'm going to offer it up at the leading edge.
And so our philosophy is we provide basket outside sendai value shallow so anyhow I can tell you that they badly solutia went up 42% in the year and easy field phase will adopt the more or less in the same what I and show year over year.
Okay, and then secondly, do you have as you mentioned.
The inflation factors in the pricing that you're taking watching supply chain things of that sort can.
Can you quantify any kind of unexpected negative impact that the fourth quarter P&L absorbed maybe talk about the timing of the pricing is there any lag between.
The pick up on pricing versus the cost that you're you're incurring.
Yeah sure. So anybody has seen the industry we are facing in.
Inflation pressure.
Like any other industry.
We have experienced we mentioned in Q3, some logistical cost increase we are putting our mall based semi about costing crazy now.
Total amount of ethylene cost and as Franco was saying, we're recalculating pricing price, we in Philly and.
Rising price accordingly.
All of it all we expect the also they can now be inflation from our model and organic double digit growth of blended plentiful compared to FY 'twenty one.
Okay and then.
Just the last question I have is around around your capacity you mentioned the shift in some of your Capex spend.
And I guess first of all I wanted to just confirm that that's not impacting the timing of of capacity that you're you're bringing on.
And then kind of maybe flipping the coin in asking the question the opposite way does the BARDA investments.
To give you any ability to accelerate the pace of build out and validation of your Indiana Greenfield. Thanks.
Oh.
Starting from the first part of your question about the capacity, we have our regional plan for capacity expansion. The demand grew more than expected. So we took the decision to boost the capacity in Italy that these are the way we can bridge waiting 40.
The availability of our new capacity in U S and China in China, and our model our approach to investment.
Its ability to be already asking Paul.
Paul Silva to match or the upside in demand.
To the second part of your question about the <unk>.
But the agreement the envelope of a multiyear plan to expand the capacity for sure.
So I'll talk about acceleration of powerful Wawa initial plan, but if not for the short time.
Okay. Thank you.
Thanks, David Operator can we please have the next question.
Our next question comes from Paul Knight from Keybanc. Your line is open.
Hi, yes. Thanks for the question could you update us on the planning on the China expansion as well.
Yes, our plans are not changed at all we are perceiving that we as we mentioned with bandwidth some time to improve and to optimize the capital location also to work on.
Like all appropriate financial incentives, but we are in line with both of them.
Designing and stocking of construction and hiring people and training people to get ready for the data. We already mentioned that is that first the PBT in that first and then yours in.
Our first thoughts on the second one I'll call them trying to four.
And then it looks like Covid and non Covid grew a little better than expected.
<unk> is the.
Industry, moving down lower doses per vial with Covid at this point do you think.
But there is.
Continuation of these trying to move up for a multi dose single dose that impacted the volume needed for the market to both.
<unk>, we see opportunities in both areas because as you are well aware that we produce both the ceiling doesn't buy you our C&D just prove it.
To be the right solution supported most.
Most suitability.
For the chain distribution. So we monitor these trends and there is no impact in our planning and about the capacity expansion.
Thank you.
Our next question comes from Derik de Bruin from Bank of America. Please go ahead.
Hi, good afternoon, and thank you for taking my question one housekeeping question, what's embedded in your guidance for FX in the top line.
Alright.
Derek Let me just clarify you're wondering what the currency translation rates are that are embedded in our guidance.
Yes, they had yeah, what should we model for currency headwinds I'm trying to answer the question about what's the organic revenue growth guide.
Four.
The total debt yes.
Thank you for the question that we don't expect a material change as compared to 2021 in our model.
Great. Thank you.
Yeah. When you look at your when you look at your business.
Covid expectations you had your guidance you were basically in line with where we are I guess the question I had is like if <unk>.
You didn't have.
If you Werent doing COVID-19 work.
There are.
<unk>.
Would your core business Youre not core business be even higher that is are you turning away business or Dwayne business due to COVID-19 .
Happy to Covid work, it's basically trying to get to sort of like what's the underlying core demand.
As though we have several timon mentioned our business not the COVID-19 dependent.
This ability we have because of the backlog and interaction with customer may cause a good position to <unk>.
Catherine.
Order intake and we have good visibility in Covid revenue. So we think and we believe that we remain consistent in the near term, it's hard to speculate about the future of the COVID-19 , but we feel reasonably confident that we can match Amy.
Stable free capacity with fresh order because the demand is very strong in different therapeutic areas.
And just to complement right you mentioned the fact, yes.
This ability in our lab in form of backlog of 75% of 'twenty to 'twenty two make Boeing got an answer.
So again, we have clear visibility also about golf with for 2022, and France, Bracco, withstanding, obviously more difficult to speculate.
But 2023 and beyond.
Great and then just one final question.
High value solution to 25% exiting.
Fiscal 'twenty one.
Mid 30% by 'twenty six how should we think about that number for 'twenty two.
Increment another increment.
I know, it's not going to be linear, but should we think about another two to three percentage point.
The increase on average per year.
So thank you for the question as you noted we were at.
17% range and 19 2020, and we have close to 25% in 2021, we see the trajectory going although we have a robust backlog and visibility and we see high 20% range of Florida for 2020.
Consistent with our trajectory and the expectation to meet the.
Mid 30% by FY 'twenty six.
Great. Thank you very much.
Our next.
<unk> comes from Lydia <unk> from Citi. Please go ahead.
Hi, Thanks for taking my question I'm on for Patrick So I think backlog as you touched on earlier ramp to $880 million this year.
Can you just talk more about how that 75% for 2022, that's covered compare to prior years.
Yes, the backlog is much stronger.
Compared to 12 months ago.
How do we add approximately six Sandra <unk> of backlog. So we have much more visibility this year compared with 12 months ago, we see it almost backlog in bulk segment, so that percentage is more or less sustaining the two segments there.
So we have clear visibility ability to planning that's the answer.
Great. Thanks.
Helpful. And then I guess just broadly can you talk about.
How you guys performed in the three regions between Europe U S and APAC.
And what your outlook is for these regions and going into 2020 again. Thanks.
Yeah about the read Josh.
We are.
Yes, good on nausea Pacific, particularly as you have seen in 2021.
Expect that will boost golf ball.
<unk> North America reinsurance for planting flags.
Europe is still there.
And important market for us, but we see good all way more social EHR venue.
Thank you.
Our next question comes from Tim Daley from Wells Fargo. Please go ahead.
Alright, thanks for the time. So my first question is.
I'm thinking a bit more into the booking trends in the backlog how should we be thinking about this.
The lead times and the percent of revenues that were that are captured in backlog heading into the year. As we go forward are you expecting some sort of normalization in lead times.
Any sort of detail you can provide around what happens when things start normalizing a bit more.
How should we think about the trajectory of backlog and book to bills and everything throughout 2022.
Yes, Great question, let me know.
<unk> has mentioned a couple of times.
A lot of SaaS, the mask booking in advance capacity to secure the data supply chain and disease.
One of the reason why we have been able to get all the backlog saw significantly decided to grow in all of our Sevan Auto group business.
It's not easy to speculate what was going to happen in the future.
But we see as Franco was saying very robust demand in the market. So we're not too worried about.
Building our capacity for the future.
Okay.
Similar vein there just I know you noted that 75% of the sales for 2022 are captured in backlog.
For the around $140 million or so euros of Covid works expected per your guidance here how much of that is captured in the backlog or are there any assumptions baked into that 140 million euro number.
Yes, more or less the same percentage.
I mean, the 75%.
All of it.
Okay.
Helpful. And then my final one is on margins. So obviously lots of noise going on in the macro front, especially in Europe around energy prices what are the assumptions.
Baked into the EBITDA guidance for I guess energy prices how much of your expenses. This year were spent on energy and do you have any hedging mechanisms in place.
To account for the macro volatility going around right now.
Yes, those are out of the cost.
Talking about when we say we are fully calculated calculating our total manufacturing cost.
Again. This is a situation everybody are facing in any industry our customers understand it does obviously, we try to minimize the cost increase and lastly, our increase in our price accordingly.
And then Tim just to follow up on that as Michael mentioned previously.
If you exclude the cost increases and year to year, we still anticipate double digit organic growth.
Okay.
Alright, and then are there any hedging mechanisms in place for energy costs.
There is no mechanism you can also the clauses that are in there.
Generally in our agreement with the customer, but there'll be a relationship. We've got the model has also two to share their situation and we think they can really understand what is going on in the market.
And you probably know an important part of our production is in Italy, where do we have some protection due to their long term agreement we have a weekday.
Typically, especially here in Italy.
Yes.
Alright, great. Thank you I appreciate the time thanks.
Thanks, Tim Operator next question please.
Our next question comes from drew Ranieri from Morgan Stanley . Your line is open.
Hi, Thanks for taking the question is just on guidance for a moment.
You grew 15% ex Covid and 2021 2022, it looks like it's taking a little step down.
Is this just a modeling conservatism into your guidance or just as Youre kind of looking at the business can you talk about maybe areas of the business, where you are starting to see any type of slower growth rate relative to 2021.
And then just on your commentary about phasing between the back half and first half of the year can you give us a little bit more detail there on how the business should ramp over the year. Thank you.
Thank you for the question so.
<unk> to 'twenty two is national we expect a strong gusts saves in second half of the year compared to the first part of the year because of the capital deployment.
Increasing capacity mainly in field solutions.
We can tell you also that we expect.
Bob will get off in our Pts segment boosted by <unk>.
In January we are initially modeling in <unk>.
High single digit growth compared to 2021, when went up almost 55%.
Okay. Thank you Ed.
And then just on the inflationary environment you touched on this a little bit but should we think gross margins are it will be able to actually expand in 2022 or should we kind of think about it more consistent with your.
2021 levels or high value solutions really.
The mix shift and Youll see some pricing benefit just trying to get a better sense of gross margin expansion here.
Well I think that's it.
As a.
So to go back to the driver of our growth that gives the market, but the market demand is growing very fast and the demand for our high value solutions.
Very strong.
Particularly in syringes with next.
Next up is if you buy us also enjoyed very well.
Demand. So this is the main driver and we are growing because we are booking onboard investments aimed at the direction of deploying the capital step by step but to increase the share of high value solution portfolio.
Portfolio. So the margin I think there is a naval rate is the result of these are for the coming from the demand on the market.
Got it and then just lastly, just on Covid related revenue and is there any way to put out a 2023 number of kind of what you're thinking about.
The potential Covid contribution.
Okay.
Manny valuables plane.
For 2023, we made sure that they are shifting from multi dose single dose that Kevin and that that.
That will be.
From new product profile available from the economic point of view.
We cannot speculate on the presence of.
Our audience and there are many manifesto to be.
Understood before to provide 99, but Sean <unk> right.
Understood. Thanks for taking the questions.
Our next question comes from Jon <unk> from UBS. Please go ahead.
Hi, Thanks for taking my question.
I guess any update around new customers in the quarter with hbf's growing pretty solid 63% roughly year over year, I guess, specifically what percentage of that <unk> growth was from new customers.
No.
Nobody reads out.
We're not disclosing that.
If he goes but what I can say is that there is a very good the demand for high value solutions, leading to new to <unk> and then <unk>.
Typically in biotech.
Space. So this is one of the main driver of our emerging.
So in that space.
And John just as a reminder, many of our contracts with our customers are under Nondisclosure agreements and so therefore that would be the type of information that we won't be able to provide on a regular basis.
Got it.
Thanks for the color there and then I guess just as a follow up.
The comment in <unk> with the increased absenteeism in January in Europe , due to the Undergrounds, but any way to quantify the impact there or just how we should see on the on the cadence on when to you for the guidance.
Yes.
While me combining anti hate the Europe also we have to face any because the rate, though saying to you is not in our facility in Europe , and we took a countermeasure in Panama.
More of a shift from people that we are happy and we thank you Sir.
Fan favorite to have people at work.
We are not going to quantify the impact that bought the Walter I can say is that mid to late February we came back to their normal lives.
Conditional anytime all staffing anytime our productivity and we expect that to continue at least that action.
Got it thank you for taking my question.
Our guidance inclusive of these headwinds.
Our final question comes from John Kreger from William Blair. Please go ahead.
Hey, Thanks, very much maybe just one more to try to clarify in the first quarter outlook do you expect revenue growth to be positive in the first quarter compared to last year should we assume down to that given the omicron Serge.
We expect.
Significant growth compared to previous year in the range of double digit growth.
Mark.
Is that in the first quarter or is that for the full year.
First quarter <unk>, we expect lower revenues than in Q4 in both segments.
Nevertheless, we expect.
And our guidance of double digit year over year.
Great. Thank you.
And another question it sounds like you've had strong orders.
Are you capacity constrained at all in other words what.
How does your time to complete orders now compared to where it was let's say a year ago.
First of all of the demand for our high value solution remains a very very strong so our plan to expand the capacity get.
The space is obviously a currency that is vital we recognize that <unk> is a vital factor to match the customer expectation.
And we will continue to put their best effort to match their needs in the short term time possible.
Okay. Thanks, and then one last one.
You noted capex is supposed to be much higher in 'twenty two I understand part of that is a push from 'twenty. One can you remind us what you think your longer term capex spending ratio should be relative to revenues.
Yeah, 2022 is expected to be the peak year for Capex because of the new ship launch there we expect the.
Also high Capex in 'twenty, three as we completed the buildings and machinery, Florida.
U S Europe and China.
As normalized Capex, so we see for the future of something in the range of 9% of revenue to people that all in double digits. We can expect suddenly add where we are installing more capacity followed by es when we leverage the existing capacity and just concentrate on but I think thats a portion of it but this is.
What we have in mind.
It didn't move that much normalized level of Capex.
Okay. Thank you.
Thanks, John .
We've come to the end of our Q&A I will now hand back to Mr. <unk> management team for closing remarks.
We wanted to thank everyone for joining us today for the seven on a great fourth quarter and full year 2021 earnings call. We appreciate your time and have a good day.
This concludes today's call. We thank you for joining you may now disconnect your lines.
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