Stevanato Group S.p.A. Q1 2023 Earnings Call
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Good afternoon. This is the chorus call conference operator, welcome and thank you for joining our seven nano group's first quarter 2023 financial results Conference call.
As a reminder, all participants are in listen only mode.
After the presentation, there will be an opportunity to ask questions.
She had anyone need assistance during the conference call. They may signal, an operator by pressing star and zero on your telephone.
At this time I would like to turn the conference over to MS. Lisa miles senior Vice President Investor Relations.
Please go ahead Madam.
Good morning, and thank you for joining US with me today is Frank as Devin Auto Executive Chairman Franco Morrow, Chief Executive Officer, and Mark <unk>, Chief Financial Officer, a presentation illustrating today's results can be found on the IR section of our website as a reminder, some statements being made.
Today will be forward looking in nature and are only predictions actual events and results may differ materially as a result of risks we face, including those discussed in item three D entitled risk factors in the company's most recent annual report on form 20-F filed with the Securities and Exchange Commission.
We encourage you to review the information contained in our earnings release in conjunction with our SEC filings and our latest form 20-F. The company does not assume any obligation to revise or update. These forward looking statements to reflect subsequent events or circumstances, except as required by law today.
Today's presentation may contain non-GAAP financial information management uses this information in its internal analyses of results and believes this information may be informative to investors in gauging the quality of our financial performance identifying trends in our results and providing meaningful period to period compare.
For a reconciliation of the non-GAAP measures. Please see the company's most recent earnings press release and with that I'll hand, the call over to frankly, seven auto for opening remarks.
Thank you Lisa and thanks for joining us today.
Our solid first quarter results confirm the positive momentum exiting 2022.
To date the strength in the from the main pass all what business as we advanced our multiyear strategic plan to capitalize on rising demand and to drive durable growth our experience in delivering high quality high performing products makes us a partner of choice with customers our long history of embedding sorry, yes.
Technology and industry expertise to drive continuous advancements has led to highly differentiated product portfolio.
We will work alongside our customers to drive innovation by supporting them in the early stages of development through the entire lifecycle of the drug.
Our mission critical products and build into the regulatory filings, creating a captive customer base.
We operate in growing end markets with strong secular tailwind.
We have an increasing presence in biologics, which is the fastest growing market segment.
We see ample opportunities in treatment classes, such as Jetblue answer.
Monoclonal antibodies.
Application and was shown to further support customers in the upcoming ways of new indications for Jetblue arms.
This presents a significant opportunity for us.
It is just one of the many favorable base Windsor within the growing biologics market.
Above all our global footprint and differentiated product portfolio and the integrated end to end solutions for customers.
Thomas a unique value proposition.
It provides us with sustained competitive advantages. We believe we are ideally poised to seize the opportunities in front of us to drive long term organic growth and build shareholder value.
I will now hand, the call over to Franco.
Thank you Franco.
Starting on slide seven we are off to a good start with the first quarter results highlighted by 12% revenue growth.
And then adjusted EBITDA margin of 26%.
Strong demand for our ease of use product.
Given the shifting revenue towards more accretive of high value solutions, which represented approximately 32% of revenue in the first quarter.
For the first quarter, new order intake decreased to approximately 236 million euros compared to last year.
This was due to the expected drop in COVID-19 orders and then normalization.
Wondering panos as global supply chain stabilized.
At the end of the first quarter.
Backlog of committed orders totaled approximately nine Honda and 55 million euros.
Turning to page eight during the quarter, we announced an agreement that we the thermo Fisher to launch a fully integrated supply chain for RF proprietary on body delivery system. The <unk>.
<unk> Leverages the power of our integrated capabilities by bringing together on both the drug delivery device, a ready to use or is it still cottages.
Our assembly lines.
Thermo Fisher, we provide peanut finished and final assembly services.
The collaboration offers pharma customers and proven end to end supply chain to support clients from drug development to commercialization.
We also signed an agreement to develop the manufacturer Amber refillable, so ranges for resi.
After Mr. Marcelo the combination of Albert Serena Alexey farms innovative technology delivers SaaS at biologic more efficiently and.
Improvise and naphtha stability and safety.
On the platform.
It was built for biologics.
It significantly reduces any potential interaction between the drug and the container.
On page nine.
The first on Ministration of magazine and pharmaceutical innovation.
Creating demand for our products.
Consequently, we expect that that continued advancements in biologics.
Mrna applications monoclonal antibodies, the newest glass fiber <unk> and Biosimilars.
We drive durable organic growth over the long term.
One G L P ones have been and next damage treatment for diabetes for many years.
The yen demonstrating remarkable results in weight management.
This is driving significant demand for obesity treatment.
Diabetes and obesity affect a significant portion of the world's population and.
The rates have been sedans are.
To climb.
According to the world obesity for duration.
Estimated 38% of the population was considered overweight or obese in 2020.
This is projected to rise to 51% by 2035, if current plants prevail.
Moving to page 10.
Today, the majority of injectable treatments for these diseases.
Use either and device or auto injector for self administration.
In the case of a pen device.
Doses can be modulated.
And the device can be used more than once.
The Pan uses glass bank cartridge and the Thunder delivery format adopted globally for diabetes care.
For single use auto injectors, the standard format is a syringe.
As the market leader in bank cartridges, we haven't built a leading franchise supporting diabetes management.
Our established role in the diabetes market helped but the anchor our position as one of the primary suppliers in the <unk> one market for obesity treatment.
In fact, we are present in both commercialized gelpi one products.
And new programs under development, including Biosimilars.
They are a range of products that we supply to D includes.
Cotter just easy feed cost.
And the high value sort of ranges.
On the engineering side, we are also supplying lines for visual inspection.
In lines for Assembly and packaging.
We expect that the GOP ones with continued contributed to growth in the coming years.
Most importantly.
Our opportunity set is not limited to Amy single class of treatment.
As Franco mentioned, we see broad opportunities across biologics, which is driving demand for our high value solutions.
On page 11, a brief update on our capital projects.
In both the U S and Italy progress is advancing largely as expected.
As we mentioned last quarter, we accelerated our expansion plans in Indiana in response to higher demand for high value solutions.
Driven principally by the growth in biologics.
The first production lines are on site, we are actually bringing on staff.
And validation activities are still expected to begin in the fourth quarter.
In Latina, Italy validation is still expected to begin that this summer followed by commercial production in the fourth quarter.
In summary on page 12, we are making substantial progress.
First we are shifting our revenue mix toward high value solutions.
Second we continued to be the strategic collaborations to leverage our strengths and meet customer demand.
Third we believe we are well positioned to capitalize on favorable industry trends.
The expected increase in Jetblue ones.
And finally, we remain on track with our capacity expansion in the U S and Europe as we aim to build durable organic growth.
With that I'll now hand, the call over to Michael.
Thanks Franco Biff.
Before I begin I want to clarify that all comparisons refer to the first quarter of 2022, unless otherwise specified.
Starting on page 14.
For the first quarter of 2023 revenue increased 12% to 238 million or 11% on a constant currency basis.
Principally driven by growth in both segments and the shift to high value solutions, we are making a relevant progress growing our mix of high value solutions, which increased 25% to $76 7 million in the first quarter of 2023.
<unk> represented 32% of revenue.
As expected revenue for our COVID-19 decreased 57% over the prior year and accounted for 4% of revenue in the quarter.
For the first quarter of 2023 gross profit margin increased 20 basis points to 32%, mainly driven by more accretive high value solutions and to a lesser extent margin improvement in the engineering segment.
As expected this was offset by the increased industrial costs and higher depreciation.
Our new plans come into service.
We expect this temporary inefficiencies will continue throughout 2023 and this is assumed in our 2023 guidance.
Operating profit margin in the first quarter decreased 80 basis points to 17, 1%, mostly due to the higher SG&A expenses to support growth initiatives.
Excluding startup costs on the new plants.
Adjusted operating profit margin was 18, 3% in the first quarter and consistent with the same period last year.
For the first quarter of 2023 net profit totaled $28 3 million and we delivered diluted earnings per share of 11 cents.
These included an unfavorable impact to diluted EPS of approximately one sand I recall that the finance expense.
Due to the unexpected strengthening of the Mexican peso against the Euro and the U S dollar.
Excluding startup costs adjusted net profit was 34 million.
And adjusted diluted EPS of 11 cents.
Adjusted to beat that.
Adjusted net profit was 34 million.
And adjusted diluted EPS of 11 cents.
Adjusted EBITDA increased 15% to $61 9 million.
And the adjusted EBITDA margin was up 50 basis points to 26%.
Moving to segment results on page 15.
For the first quarter revenue from the biopharmaceutical diagnostic solutions segment increased 13%.
12% on a constant currency basis to $195 5 million over the same period last year.
Revenue from high value solutions increased 25% to $76 7 million.
Revenue from other containment and delivery solutions increased 7% to one.
$118 8 million.
Gross profit margin increased 80 basis points to 33, 7% in the first quarter of 2023.
Mainly driven by the growing mix of more accretive high value solutions.
For the first quarter of 2023 operating profit margin for the Bds segment decreased to 19, 8%, mainly due to higher SG&A cost to support growth initiatives.
For the first quarter of 2023 revenue from the engineering segment increased 7% to $42 4 million driven by strong sales in visual inspection and assembly packaging lines.
For the first quarter of 2023.
Profit margin for the engineering segment increased 30 basis points to 21, 7% driven by higher margins in all product families and ongoing business optimization asphalt.
Improvement in gross profit margin and higher absorption of SG&A costs led to operating profit margin of 15, 2% in the first quarter of blanket 23.
An increase of 140 basis points over the same period last year.
Slide 16.
As of March 31, 2023, we add the net debt for $46 5 million in cash and cash equivalents of $158 8 million for.
For the first quarter of 2023 net cash generated from operating activities was $37 1 million and reflects our current working capital needs to support the growth in the business.
As expected capital expenditures for.
For the first quarter of 2023 were $113 2 million as we expand our industrial footprint amid the rising customer demand.
This was the main reason for negative free cash flow of 91 million in the first quarter.
We believe that our cash on hand, coupled with our loan agreement provides us with adequate liquidity to fund near term growth.
Lastly on page 17, we are later rating our full year 2023 guidance.
We continue to expect.
Revenue in the range of $1 billion 85 million to $1.115 billion.
Adjusted diluted EPS in the range of 58.
62, <unk> and <unk>.
Adjusted EBITDA in the range of $290 5 million to $302 5 million.
Our plan to 'twenty three guidance assumes that the for.
For the second quarter of 2023.
Revenue is expected to grow in the range of mid single digits to high single digits compared with the same period last year.
Revenue will be stronger in the second half of 2023 compared with the first half of the year.
High value solutions will represent approximately 32% to 34% of revenue.
COVID-19 represent approximately 2% to 3% of revenue.
And lastly, we are estimating a currency headwind of approximately $13 million to $14 million.
Thank you.
I N the call to Franco for closing comments.
Thanks Marco.
In closing we are operating in an environment of a favorable demand with attractive end markets characterized by strong secular tailwind.
We are executing against our strategic and operational priorities to capitalize on demand and support customers across the entire life cycle.
We continue to make relevant progress as we advanced our global expansion plans to increase our capacity in high value solutions.
Enhance our proximity to customers grow our mix of high value solutions as customers turn it to really to use formats and move up the product value chain.
Invest in R&D.
To maintain and accelerate our market leading position.
And build and multiyear pipeline of new opportunities by supporting our customers through scientific innovation to meet their evolving needs.
Lastly, we will host our first capital markets day on September 27th in New York City.
So stay tuned for updates over the next few months.
And with that let's open it up for questions.
Excuse me. This is the chorus call conference operator, we will now begin the question and answer session.
Anyone who wishes to ask a question my questions and one on a touchtone telephone.
To remove yourself in the question queue. Please press Star then two please pick up the receiver when asking questions.
Our first question comes from Derik de Bruin of Bank of America.
Okay.
Your line is open Sir.
Oh, sorry, I was on mute. Thank you. Good morning, Thanks for taking my question.
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