Q3 2023 Stevanato Group SpA Earnings Call

Good afternoon D. CS the chorus call conference operator, welcome and thank you for joining the stem on auto group third quarter 'twenty, two 'twenty three 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 should anyone need assistance during the conference call. They may seek them out and I don't know parade, so by pressing star and zero on the 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 you can find a presentation to accompany today's results on the Investor Relations page of our website, which can be found under the financial results tab.

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 SEC.

Please take a moment to read our safe Harbor statement, including in the front of today's presentation.

We encourage you to review the information contained in our most recent SEC filings, including our latest form 20-F filed on March 2nd 2023.

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.

This 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.

Essence.

For a reconciliation of the non-GAAP measures. Please see the company's most recent earnings press release, I will now hand, the call over to Franco seven auto for opening remarks.

Thank you Lisa This morning, we reported our third quarter results with double digit revenue growth and an adjusted EBITDA margin of 27, 5% in line with our near term financial targets.

Why third quarter I mean, you're in the engineering segment fell short of our expectations largely due to timing of revenue. We remain confident that we can achieve out about 40 out of guidance.

I realize that at our capital markets day, the phone the main pass over our business remain strong.

For the last 50, yes, our focus has been on delivering the highest quality products to pharmaceutical customers worldwide.

Our unique value proposition of integrated end to end solutions has helped us become a leading partner of choice.

We support our customers through the entire drug lifecycle from early stage development through commercialization.

Our differentiated products and by the science and technology to meet the most stringent standards that's customized to demand.

We are currently benefiting from macro trends such as edgy population, the rising biologics and Biosimilars and the shift towards a self administration of magazine, we operate in growing end markets, particularly biologics, where we have built a leadership position in treatment areas such as JP one.

Monoclonal antibodies and Madden applications.

As previously disclosed our 2022 FDA approvals, we are present in three out of four of the potential blockbusters all of which are biologics.

Biologics, which are mostly administered three injections are delivering breakthrough results inpatient care, but they tend to be costly and more challenging to manifest June due to their sensitive nature.

These factors are driving demand for high performing drug containment to ensure the integrity and stability of treatments delivery to patients.

Moreover, the global pipeline of drugs in development is at record levels with more than 60% and injectable formats.

In summary, we believe that these positive trends position us well to capitalize on the many fab bareboat secular tidal wave.

We are focused on executing against our strategic priorities to deliver sustainable organic growth and build shareholder value.

Thank you I will now hand, the call over to Michael.

Thanks Franco before.

Before I begin I want to clarify that all comparisons refer to the third quarter of 2022.

Unless otherwise specified.

Starting on page seven.

For the third quarter of 2023.

Revenue increased 11% to $271 4 million.

And 13% on a constant currency basis, driven by growth in both segments.

Why do we achieved double digit growth. This is below what we expected for the third quarter assays at the time of our capital markets day.

Since then our revenue tied to specific engineering contract as shifted to the right and do you expect to recognize the revenue in the fourth quarter.

As a reminder, the engineering business is project based and we have revenue recognized on a cost to cost percentage of completion basis.

And it can vary from quarter to quarter.

The engineering business is comprised of larger complex projects that have a long life cycle from start to finish typically 12 to 24 months, depending on the nature of the project.

In the first quarter there were a couple of dynamics at play.

Third we have been experiencing strong demand for manufacturing lines and this demand has outpaced our expectations from a year ago.

This is certainly positive for us, but at the same time it is increasing the pressure on operations for timely delivery.

Secondly, the pandemic created volatility in supply chains.

And we are still working through a bottleneck or work in progress that resulted from the electronic component shortages last year.

This combination of strong demand is supply chain volatility placed stress on our resources and.

Resulting in certain projects experiencing delays and lower than expected marginality.

We believe we are on the right path to better balance our resources with demand.

And Frank will discuss the initiatives, we are taking under our efficiency plan.

The DDS segment, therefore in line with the assumption embedded in our guidance.

We continue to gain traction with our customers with the adoption of high value solutions in the third quarter high value solution represented 32% of revenue compared with 30% for the same period last year.

In the third quarter revenue from COVID-19 decreased 84%.

And that accounted for approximately 2% of revenue SKU.

Grew their revenue from COVID-19 third quarter revenue increased approximately 25%.

With our diversified portfolio, we have been successfully managing their law firm and back feeling that revenue with new and expanding projects.

For the third quarter gross profit margin was impacted by the lower marginality in the engineering segment the.

The ongoing start up of the new manufacturing plants.

And the higher depreciation.

As a result gross profit margin decreased 110 basis points to 35%.

As we continue to execute our strategic priorities.

Operator: Good afternoon, this is the Carusco Conference Operator. Welcome and thank you for joining the Stevanato Group Third Quarter 2023 Financial Results Conference call. As a reminder, all participants are in this and only mode.

We are also closely managing our SG&A expenses as we grow the business.

In the third quarter of 2023.

Operating profit margin was 18, 8%.

Operator: After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone.

And the adjusted operating profit margin was 20%.

On the bottom line for the third quarter of 2023.

Net profit increased 4% to $37 9 million.

Lisa Miles: At this time, I would like to turn the conference over to Miss Lisa Miles, Senior Vice President Investor Relations. Please go ahead, Madam.

And we delivered diluted earnings per share of 40 insane.

Adjusted net profit increased 6% to $40 1 million.

Lisa Miles: Good morning and thank you for joining us. You can find a presentation to accompany today's results on the Investor Relations page of our website, which can be found under the Financial Results tab. As a reminder, some statements being made today will be for 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 3D entitled risk factors in the company's most recent and in report on form 20F filed with the SEC.

And adjusted diluted earnings per share were <unk> 15 cents.

Adjusted EBITDA increased 13% to $74 7 million.

And the adjusted EBITDA margin was up 70 basis points to 27, 5%.

Let's review, new orders intake, which increased 4% to approximately 256 million during the third quarter of 2023.

We ended the quarter with a backlog of committed orders of approximately 924 million.

Lisa Miles: Please take a moment to read our safe harbor statement, including in the front of today's presentation. We encourage you to review the information container and most recent SEC filings, including our latest form 20F filed on March 2nd, 2023. The company does not assume any obligation to revise or update these for looking statements to reflect subsequent events or circumstances, except as required by law. Today's presentation may contain non-GAP 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 comparisons. For a reconciliation of the non-GAP measures, please see the company's most recent earnings press release.

Moving to segment results on page eight.

For the third quarter, our revenue from the biopharmaceutical and diagnostic solutions segment increased 6% to $218 9 million and 8% on a constant currency basis.

Excluding revenue related to COVID-19, the Bds segment grew approximately 23%.

Revenue for our high value solutions increased 16%.

$86 2 million and revenue from other containment delivery solutions.

It was $132 8 million consistent with the same period last year.

As expected in the third quarter of 2023 marriage and seen the Bds segment were tempered by a rising startup costs and buyer depreciation.

Franco Stevanato: I will now hand the call over to Franco Stefano for opening remarks. Thank you, Lisa. This morning, we reported our third quarter results with double-digit revenue growth and an adjusted EBDA margin of 27.5%, in line with our near-term financial targets.

This was partially offset by higher mix of high value solutions.

As a result, the segment delivered a gross profit margin of 32, 7% and operating profit margin of 21, 2%.

Franco Stevanato: Why third quarter revenue in the engineering segment felt short of our expectations, largely due to timing of revenue, we remain confident that we can achieve our full year guidance. As we highlighted, at our capital markets day, the fundamentals over business remain stronger. For the last 50 years, our focus has been on delivering highest quality products to pharmaceutical customers worldwide. Our unique value proposition of integrated end-to-end solutions has helped us become a living partner of choice.

Our revenue in the third quarter of 2023 from the engineering segment increased 37% to $52 5 million.

Driven by growth in all business lines.

This was lower than expected due to the timing of revenue on certain engineering project and.

And we expect to recognize the revenue in the fourth quarter.

For the third quarter of 2023 gross profit margin was 18, 5% and operating profit margin was 11, 2%.

Franco Stevanato: We support customers through the entire drug life cycle, from early stage drug development through commercialization. Our differentiated products and bad science and technology to meet the most stringent standards that customers demand. We are currently benefiting from macro trends such as edgy populations, the rise in biologics and biosimilar and the shift towards a certain administration of medicine. We operate in growing and markets, particularly biologics, where we have built a leadership position in treatment areas such as JP1, monoclonal antibodies and mRNA applications.

The decrease in margins was mainly driven by lower marginality on specific projects in progress and to a lesser extent, a lower mix of after sales activity.

On page nine at the end of the first quarter, we had net debt of about $227 5 million.

Cash and cash equivalents of $64 8 million.

As expected capital expenditures were $107 2 million in the third quarter and we remain on track with the capacity expansion in high value solution to meet customers' demand for ready to use drug containment.

Franco Stevanato: Jones, as previously disclosed, of 2022 FDA approvals, we are present in three out of four of the potential blockbusters, all of which are biologics. Biologics, which are mostly administered through injections, are delivering breakthrough results in patient care, but they tend to be costly and more challenging to manufacture due to their sensitive nature. These factors are driving the men for hyperforming drug containment to ensure the integrity and stability of treatments delivery to patients. Moreover, the global pipeline of drugs in development is at record levels with more than 60% in injectable formats.

For the third quarter of 2023 cash flow from operating activities was $33 5 million, which reflects our current working capital needs to support organic growth.

Cash used for the pool chase of property plant and Mckeith meant in the intangible asset was $132 three medium, which resulted in negative free cash flow of 97.8 million.

Lastly on base pain, we are reiterating our full year 2023 guidance.

We continue to expect.

Franco Stevanato: In summary, we believe that this positive trends position as well to capitalize on the many favorable secular tailwinds. We are focused on executing against our strategic priorities to deliver sustainable organic growth and build the shoulder value.

Revenue in the range of 1.085 billion to 1.150 billion Ah.

Adjusted EBITDA in the range of 291.8 million to $303 8 million.

Franco Stevanato: Thank you.

And adjusted diluted EPS in the range of 58 to 62 St.

Marco Lago: I will now hand the call over to Marco. Thanks, Franco.

Thank you.

I will end the call to Franco.

Marco Lago: Before I begin, I want to clarify that all comparisons refer to the third quarter of 2022, unless otherwise specified. Starting on page 7, for the first quarter of 2023, driving increased 11% to 271.4 million, and 13% on a constant currency basis driven by growth in both segments. Why do we achieve double-digit growth? This is below what we expected for the third quarter says at the time of our capital market day. Since then, a revenue tie to specific engineering contracts has shifted to the right and we expect to recognize the revenue in the fourth quarter.

Thanks Marco.

So we provided a full business update at our recent capital markets day.

I thought it might be helpful to spend some time focusing on a couple of demand dynamics. We currently see within the segments.

Let's start with the engineering.

<unk> Engineering segment provides us with an important advantages and point of differentiation with our customers.

As Michael noted.

Amanda has picked up over the last year, particularly for visual inspection and assembly lines.

Mostly driven by the growth in biologics.

To satisfy demand we are adding resources.

Marco Lago: As a reminder, the engineering business is project-based. We revenue recognize on a cost to cost per cent of completion basis, and it can vary from quarter to quarter. The engineering business is comprised of large, complex projects that have a long life cycles from start to finish typically 12 to 24 months, depending on the nature of the project.

Announcing technical capability is to how to drive digitalization and implemented continuous process improvements to increase the efficiency and cost optimization.

Nevertheless, we expect that it will take some time to work through the current bottlenecks.

Turning to the pediatric segment, which benefited from COVID-19 in 2021 and 2022.

Marco Lago: In the first quarter, there were a couple of dynamics at play. First, we have been experiencing strong demand for manufacturing lines and this demand has helped pace our expectation from a year ago. This is certainly positive for us, but at the same time, it is increasing the pressure on operations for timely delivery. Secondly, the pandemic created volatility in supply chains, and we are still working through a bottleneck of working progress that resulted from the electronic component shortages last year. This combination of strong demand, a supply chain volatility, plays stress on our resources, resulting in certain projects, experiencing delays and lower than expected marginality.

Coming into fiscal 2023, we phased that a year over year revenue had the win of about 80 million Europe.

Despite this the Bts segment is on track for double digit growth in 2023.

However.

I would like to point out some differences that we've been at two of the business lines in our <unk> segment.

As COVID-19 right.

Venue Weinstein.

First.

Core drug containment solutions or D C S business.

Half more than overcome the COVID-19 headwind.

Demand remains robust.

Driven by the need for high performance drive containment.

Marco Lago: We believe we are on the right path to better balance resources with demand, and Franco will discuss the initiatives we are taking under our efficiency plans. The BDS segment performed in line with the assumption embedded in our guidance. We continue to gain traction with our customers with the adoption of high value solutions. In the third quarter high value solution represented 32% of revenue compared with 30% for the same period last year.

And the adoption of our ready to use our solutions in.

In the third quarter.

Our core Dcs or business grew about 10% compared with the same period last year.

Excluding COVID-19.

Drug campaign in business.

<unk> more than 25% in Q3.

The doctor and their opinions the clear secular tailwind that we discussed at our capital markets day.

Our investments and capacity expansion are designed to meet this demand.

Marco Lago: In the third quarter revenue from COVID-19 decreased 84% and accounted for approximately 2% of revenue. Excluding revenue from COVID-19, third quarter revenue increased approximately 25%. With our diverse high portfolio, we have been successfully managing their all-off and backfilling the revenue we knew and expanding projects. For the third quarter, Gross Profit Marge was impacted by the lower marginality in the engineering segment. The ongoing start-up of the new manufacturing plants and higher depreciation.

Second and as expected.

In vitro diagnostics business has been much slower to recover coming out of COVID-19.

We assumed deal in our guidance at the beginning of the year.

While we are starting to see some recovery with certain customers. We currently anticipate that the business will normalize over the next couple of quarters now.

Nevertheless.

The in vitro diagnostic or business.

Is there a strategic approved to hold that we are leveraging to diversify and expand our core competencies into drug delivery system activities. We.

Marco Lago: As a result, Gross Profit Marge increased 110 basis points to 30.5%. As we continue to execute our strategic priorities, we are also closely managing our SGNA expenses as we grow the business. In the third quarter of 2023, Operating Profit Marge was 18.8% and adjusted operating profit margin was 20%. On the bottom line for the third quarter of 2023, Net Profit increased 4% to 37.9 million and we delivered diluted earnings per share of 14 cents.

With our unique value proposition of integrated end to end solutions, we are bringing the full power of our capabilities to bear.

We are winning new business in the DSO space.

Both.

<unk> and proprietary.

We currently expect that our revenue will begin to materialize from these new business opportunities sometime in the back half of 2025.

We also see a strong pipeline of future projects complemented by your opportunities on the engineering side for Assembly lines.

With the growth in biologics and the trends towards the South I mean, it's Tricia magazine.

Marco Lago: Adjusted Net Profit increased 6% to 40.1 million and adjusted diluted earnings per share were 15 cents. Adjusted the bid increased 13% to 74.7 million and adjusted the bid margin was up 70 basis points to 27.5%. Let's review new orders in take which increased 4% to approximately 256 million in the third quarter of 2023. We ended the quarter with a backlog of committed orders of approximately 924 million.

This is a natural or a stepping stone to supporting customers with integrated platforms, combining both ranked containment and delivery solution down the road.

In closing.

We are maintaining our full year 2023 guidance and we currently see positive long term trends.

We are operating in an environment of favorable demand growing end markets and multiyear secular drivers we.

We are working with our customers every day to support their needs across the entire drag of life cycle. We remain focused on operational excellence and the successful execution of our near term strategic and operational priorities.

Marco Lago: Moving to segment results on page 8, for the third quarter revenue from the biopharmaceutical and diagnostic solution segment increased 6% to 218.9 million and 8% on a cost and currency basis. Excluding revenue related to COVID-19, the BDS segment grew approximately 23%. Revenue from high value solutions increased 16% to 86.2 million and revenue from other containment delivery solutions was 132.8 million consistent with the same period last year. As expected, in the third quarter of 2023, margins in the BDS segment were tempered by a rise in start-up cost and higher depreciation. John, this was partially upset by a higher mix of high value solutions. As a result, the segment delivered a gross profit margin of 32.7% and operating profit margin of 21.2%.

As we aim to complete our capacity expansion projects in the U S and Italy grew.

Grow the mix of high value solutions invest in R&D to advance our premium primary packaging and drug delivery systems.

And build mighty our pipeline of new opportunities.

By supporting our customers through scientific innovation to meet their evolving needs.

These priorities are specifically designed to capitalize on market trends to drive long term sustainable organic growth and build shareholder value.

And with that let's open it up for questions.

This is the chorus call conference operator, we will now begin the question and answer session.

One who wishes to ask a question May press star and one touch tone telephone.

Marco Lago: Arriving in the third quarter of 2023 from the engineering segment increased 37% to 52.5 million, driven by growth in all business lines. This was lower than expected due to the time or revenue on certain engineering projects, and we expect to recognize the revenue in the fourth quarter. For the third quarter of 2023, gross profit margin was 18.5% and operating profit margin was 11.2%. The decreasing margins was mainly driven by lower marginality on specific projects in progress, and to a lesser extent, a lower mix of after-stays activity.

Yourself from the question queue. Please press star two.

Please pick up the receiver when asking questions.

Anyone who has a question May press star and one at this time, we will pause for a moment that's callers join the queue.

The first question is from Derik Debruin of Bank of America. Please go ahead.

Hi, Good morning, and thank you for taking my question. So.

I appreciate that the engineering segment was below your expectations, but.

It.

Basically it was a little bit ahead of what the consensus estimates are looking for a while it was bds that was below I could you just talk a little bit about this.

Marco Lago: On page 9, at the end of the third quarter, we had net depth of 227.5 million, and cash and cash equivalence of 64.8 million. As expected, capital expenditures were 107.2 million in the third quarter, and we remain on track with a capacity expansion in high value solutions to meet customer's demand for ready-to-use drag containment. For the third quarter of 2023, cash flow from operating activities was 33.5 million, which reflects our current working capital needs to support organic growth. Cash use for the purchase of property plants and equipment and intangible assets was 132.3 million, which resulted in negative free cash flow of 97.8 million.

In terms of just some of the seasonality.

That might have been going on and the ramp in Bds from <unk> to <unk> and also how much es revenue got pushed.

Pushed into from <unk> to <unk>, Thank you and I've got a follow up.

I thought.

Okay.

Nice question Derrick.

I stopped humping about.

The situation then Marco may complement about the figures.

Obviously, we have a ton of ordering a partner for customers that are normally drives some overweight in business in the second part of the year, but there's also the new capacity coming into play that is delivering more in our high value solution and about your question on Bds, Yes, we have a son, Inc.

From.

The in vitro diagnostic of that these are.

Marco Lago: Lastly, on page 10, we are reiterating our full year 2023 guidance. We continue to expect revenue in the range of 1 billion 85 million to 1 billion 150 million, adjust the bid in the range of 291.8 million to 300 and 3.8 million, and adjust the LUTDPS in the range of 58 to 62 cents.

Lower recovery after Covid about the assumption that we embedded in our guidance.

Marco Lago: Thank you.

Early in the beginning of the year, but there were also two right for their view about the Dcs are where we are enjoying the ferry.

Longer grocer, if you look at the numbers.

Out of Covid that we are having that 25% more in the CSO business. So in time Alba.

Franco Stevanato: I will end the call to Franco. Thanks, Marco.

Seasonality again. The result is that these are.

But is not completely new.

Franco Stevanato: Since we provided a full business update at our recent capital markets day, I thought it might be helpful to spend some time focusing on a couple of demand dynamics we currently see within the segments. Let's start with engineering. The engineering segment provides us with an important advantage and point of differentiation with our customers. As Marco noted, demand has picked up over the last year, particularly for vision inspection and assembly lines, mostly driven by the growth in biologic. Felix, to satisfy the man we are adding resources and asking technical capabilities to help drive digitalization and implement the continuous process improvements to increase efficiency and cost optimization.

Yes, and about the guidance we are reiterating our guidance also by segment that we still expect that double digit organic growth in both segments and the expansion of our high value solution with the percentage between 30% to 34% of our revenue. So for the year we are in line.

With our expectations.

Got it.

Expectation on what got pushed from <unk> to <unk> on the Es side.

Yes, yes.

Commented there is mainly related to the engineering side. There were some revenue shift from Q3 to give Florida, you probably remember our long term contracts from 12 to 24 miles that are treated with the percent of completion method for revenue recognition.

And there are bad down net cost to cost.

Aggressor. So matter of fact, we have been able to progress less in Q3 due to lower costs than expected and this is something that will be recovered in Q4 or with their cost of power brands.

Franco Stevanato: Nevertheless, we expect that it will take some time to work through the current bottlenecks.

Franco Stevanato: Turning to the BDS segment, which benefited from COVID-19 in 2021 and 2022. Coming into fiscal 2023, we faced a year-over-year revenue headwind of about 80 million euros. Despite this, the BDS segment is on track for double digit growth in 2023.

Got it and then just one final follow up what's on the backlog what was the net new orders. The book to Bill has been trending a little bit less than one and just wanted to know how you're feeling about initial thoughts on if any initial thoughts on how that will flow into 2024, basically you've got a.

Your.

There is a double digit.

Franco Stevanato: However, I would like to point out some differences within two of the business lines in our BDS segment, as COVID-19 revenue winds down. First, our core drug containment solutions or DCS business has more than overcome than COVID-19 headwind. Demand remains robust, driven by the need for high-performance drug containment and the adoption of ready-to-use solutions. In the third quarter, our core DCS business grew about 10% compared with the same period last year.

Revenue growth expectation for the business for next year, just wondering how the backlog is looking net new orders and sort of like any initial thoughts on how this will sort of like flow into revenues for 2024. Thank you.

Yes.

Can tell you about that the backlog in lamps Frankel with comment about 2020, Florida is that we are we have confidence in our guide us for planted 23, because we are called for about 97% of the center point of our guidance.

And those are the maintenance portion of our $924 million back close is associated to revenue that will be recognized in 2020, Florida.

So this is the starting point and digest the reiterate the message that this is.

Franco Stevanato: Excluding COVID-19, our drug containment business grew more than 25% in Q3. The data underpins the clear secular tailwinds that we discussed at our capital markets day. Our investments in capacity expansion are designed to meet this demand.

Not the only PPI, we add for visibility of the future growth.

And about the future. Good after we are reiterating also the message we delivered during a water.

Our market cap.

Capital markets day, where do we see on average.

Franco Stevanato: Second, and that's expected, our individual diagnostic business has been much slower to recover coming out of COVID-19. We assume this in our guidance at the beginning of the year. While we are starting to see some recovery with certain customers, we currently anticipate that the business will normalize over the next couple of quarters. Nevertheless, the in vitro diagnostic business is a strategic food hold that we are leveraging to diversify and extend our core competencies into drug delivery system activities. With our unique value proposition of integrated end-to-end solutions, we are bringing the full power of our capabilities to bear. And we are winning new business in the DDS space, both CDMO and proprietary.

Low double digit growth towards 2027.

Thank you.

The next question is from Paul Knight of Keybanc. Please go ahead.

Franco could you talk about capacity expansions.

I know Latina has opened.

Status of Indianapolis, and then does the engineering segment.

You need to expand capacity as well thank you.

Hi, Paul Yes, I can go through your questions I'll start from saying that we are on track on our capital expansion.

Our capital is accretion.

Pharma Latina Latinate is close.

Of course to generate the first commercial revenues.

In line with our expectation I am glad to say that the we posited leader.

I see the also first of all data from.

Franco Stevanato: We currently expect that revenue will begin to materialize from these new business opportunities sometime in the back half of 2025. We also see a strong pipeline of future projects complemented by opportunities on the engineering side for assembly lines, with the growth in biologics and the trends toward the Southam in Stresha of Medicine, this is a natural stepping stone to supporting customers with integrated platforms, combining both drunk containment and delivery solution down the road.

Certification bodies and customer. So we are very glad about that the start up of a latina.

We are in the same trajectory in fee share, where we expect to have a commercial revenue in generation mid of next year, but also in this case that we are supporting the start up of both.

Local resources and also the startup of Morgan from Italy to feature to have our.

Our new colleagues there.

So we are very positive in their view about that these are bigger investment that and Youre right. We are also supporting our growth our customer needs in engineering had been our resources not only to overcome the temporary challenges we are facing as a mark on OTT.

Franco Stevanato: In closing, we are maintaining our full year 2023 guidance and we currently see positive long-term trends. We are operating in an environment of favorable demand, growing and markets and multi-year secular drivers. We are working with our customers every day to support their needs across the entire drag life cycle.

He is commerce, but also to prepare the stage for next step of growth because the success of our technology in the market. There is a higher than expected that the IPO and we are scaling up.

They are rating as a supplier of hi, <unk> technology, and visual inspection I Assembly.

Franco Stevanato: We remain focused on operational excellence and the successful execution of our near-term strategic and operational priorities as we aim to complete our capacity expansion projects in the US and Italy. Grow the mix of high-value solutions, invest in R&D to advance our premium primary packaging and drag delivery systems and build a multi-year pipeline of new opportunities by supporting our customers through scientific innovation to meet their evolving needs. These priorities are specifically designed to capitalize on market trends to drive long-term sustainable organic growth and build a shareholder value.

On the engineering segment is this demand largely monoclonal antibody or is there some G. L. P. One.

Demand out there.

His biologics biologics is growing it fast and biologics is.

An area, where our auto injector pairs or play a major role that these are good the driver not only for assembly line in devices, but also because they need so here's the devices. There is a container solution high value containment solution that the needs of these run inspection after feeling.

And most importantly.

More production on high value solutions cottages and not sell ranges. So overall is a very interesting area of our business and biologics is the most important driver and Paul just as a reminder, during our capital markets day, we did outline that we are serving G. L. P. One with engineering lines as well.

Operator: And with that, let's open it up for questions. This is the Coruscall Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch on telephone. To remove yourself from the question, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. We will pause for a moment as colders join the queue.

Okay. Thanks.

As Sabrina next question please.

Next question is from David Findlay of Jefferies. Please go ahead.

Alright, Thanks, I wanted to come back to a couple of Derek good questions.

One on the the engineering.

Revenue push out.

If the straightforward question is could you please quantify the revenue amount.

You talked about cost to cost.

But if you would please quantify the revenue amount that got pushed out.

Derek De Bruyne: The first question is from Derek De Bruyne of Bank of America. Please go ahead. Hi, good morning and thank you for taking my question. So I appreciate that the engineering segment was below your expectations but it basically it was a little bit ahead of what the consensus estimates are looking for while it was BDS that was below. I could just talk a little bit about this in terms of just some of the seasonality that might have been going on and the ramp in BDS from 3Q to 4Q and also how much ES revenue got pushed into from 3Q to 4Q. Thank you and I've got to follow up.

You mean that the shifting from Q3 Kotuku, Florida, Yes. Please.

Yes, it's about five to 6 million Nyota.

Got it thank you.

And then Mark you said in your prepared remarks, you made a comment about managing SG&A.

Costs closely.

Both the sales and marketing and G&A lines were.

Lower both in dollar and and in ratio percentage than we were looking for.

I wonder in on the point of managing those costs closely due to some of those costs need to come back was there some delay in spending given the lower revenue or are you managing to a more efficient in our level of operation, where you can sustain the lower levels that we're seeing in the third quarter.

Franco Stevanato: I start a very nice question Derek. I start saying something about the situation then Marco may compliment about the figures. Obviously we have some ordinary partners for customer that normally drives some overweight in business in the second part of the year but there's also the new capacity coming into play that is the library more in a high value solution and about your question on BDS, yes we have some impact from I'm a bit of the inoxic that is Lover in Recovery after COVID, but there is something that we embedded in our guidance early in the beginning of the year.

We are carefully managing not postponing cost obviously.

<unk> is the second one that you can see we are well in line with our R&D spend in total we added between three three to three 4% in the nine months or so in line with our expectation we have today clean sand cost in sales and marketing and G&A.

To manage efficiently our P&L.

Okay, and then last question for me.

On the on the order book question.

Say closer to your IPO period, we were still in the pandemic.

Franco Stevanato: But there was also to refer the view about the DCS where we are enjoying the very strong growth. If you look at the numbers out of COVID, we are having a 25% more in the CS business. So in terms of seasonality, again, there is something that is repetitive, but is not completely new. Yes, and about the guidance we are reiterating our guidance also by segment. We still expect double digit organic growth in both segments and the expansion of high value solution with the percentage between 32 to 34% on total revenue.

Lots of players, we're receiving orders that where clients were looking further out into the future willing to do that.

Because of supply chain challenges managing inventory.

Higher levels of demand in a lot of different reasons.

And as a result of that some of your backlog at that time would have not only into the following year, but into the year after that so and if I bring that forward to current that would be out into fiscal 'twenty. Five does your current committed order book include.

25 orders or has that kind of compressed from our forward visibility timeframe standpoint, and customers is of that question makes sense.

Franco Stevanato: So for the year we are in line with our expectations. Got it and expectation on what got pushed from three Q to four Q on the ESI. Yes, as commented is mainly related to the engineering side where some revenue shifts from Q3 to Q4. You probably remember our long term contracts from 12 to 24 months are treated with the percent of completion method for revenue recognition and they are based on a cost to cost progress.

You are right. They are a partner we are experience a change from the pandemic period.

Now and that is more similar to the pre pandemic partner.

We have.

Only a small piece of contract related to the engineering that is going to be home. The end of 2020, Florida, but is related more to the Nat short of the contracts that have been.

The fact that.

Gaston that IATA ordering.

18 months in advance as it happened during the pandemic.

Franco Stevanato: So matter of fact, we have been able to progress less in Q3 due to lower cost than expected. And this is something that will be recovered in Q4 with the cost of current. Got it. And then just one final follow up. What's on the backlog? What was the net new orders? The book to bill has been trending a little bit less than one and just want to know how you're feeling about initial thoughts on if any initial thoughts on how that will flow into 20.

I was just to say that it doesn't mean that our visibility in the future demand is a short term than in the past because at the meantime, we are developing.

Couric, and a multiyear agreement with customer.

Maintain or announce our visibility for the future is the pace to floor.

They are committed or the day.

Four of cutting to the order book of that these changes, but the visibility is steel.

Franco Stevanato: 24. Basically you've got to, you know, there's a double digit revenue growth expectation for the business for next year. Just want to know how the backlog is looking net new orders and sort of like any initial thoughts on how this will sort of like flow into revenues for 2024. Thank you. What I can tell you about the backlog and then Franco will comment about 2024 is that we are we have confidence in our guidance for 2023 because we are covered for about 97% of the center point of our guidance.

B.

Also higher and deeper than in the past.

Understood. Thank you for those answers I appreciate it.

Thanks, Dave Sabrina next question. Please. The next question is from Patrick Donnelly of Citi. Please go ahead.

Hey, guys. Thanks for taking the questions.

Frank maybe one for you as the quarter progressed did you see any change in behavior from Biopharma customers.

Just give a broad peer commentary around more cautious than maybe tighter inventory management from that customer base I'm. Just curious what you saw and if things changed at all.

Franco Stevanato: And all the remaining first portion of our 924 million backlogs is associated to revenue that we've been recognized in 2024. So this is the starting point and I just reiterate the message that this is not the only KPI we have for visibility of the future growth.

When September October or whatever it may be would be helpful. Just to kind of talk through the progression there.

Up to well understood. Your question please.

Please go resumes.

Not giving the right answer but the in terms of the.

Behavioral castorama about.

About order.

Franco Stevanato: And about the future growth we are reiterating also the message we delivered during our March capital markets day where we see on average a low double digit growth to work 2027. Thank you.

In biologics, we see the Tennessee to secure their supply chain and not only for the short term, but also for the longer run. So we are engaged with the customers important customer in planning our capacity our core names to their future needs. So.

The impact on biologics.

Because of the inventory build that unit pandemic is very minor because Europe may recall depth.

Paul Knight: Next question is from Paul Knight of Keybank. Please go ahead.

COVID-19 situation was overweighted in buyers and biologics is mostly looking at cottages answer ranges.

Franco Stevanato: Franco, could you talk about capacity expansions? I know Latina has opened status of Indianapolis and then does the engineering segment need to expand capacity as well. Thank you. Hi Paul, yes, I go through your questions, starting from saying that we are on track on our capital expansion capital execution and moving from Latina Latina is close to generate the first commercial revenues in line with our expectation. I'm glad to say that we positively received also first audit from certification bodies and customers, or we are very glad about the startup of Latina.

Because also of the day.

Utilization of the drug delivery devices. So the situation is.

Normally tam of the behavior of a customer to commit to orders about.

The really high attention to secure the supply chain for the long run.

Okay. So you didn't really see a change as the quarter progressed with biopharma customers, maybe being a little more cautious there was kind of status quo each each month of the quarter.

Okay.

So big changes in this direction the only message I can deliver his depth that they needed to get ready to meet the customer demands in the coming here.

Franco Stevanato: We are in the center trajectory in Fisher, where we expect to have a commercial revenue generation meet of next year, but also in this case, we are supporting the startup both with local resources and also the staff moving from Italy to Fisher to help our new colleagues there. So we are very positive in the view about these big investment and you are right. We are also supporting our growth and our customer needs in engineering, having resources not only to overcome the temporary challenges we are facing as the Marco noted in his comments, but also to prepare the stages for next step of growth, because the success of our technology in the market is higher than expected at IPO and we are scaling up the rating as a supplier of high hand technology visual inspection assembly.

Good the reason to work together with customers and they are very keen to have agreement with us for not only the short term, but also the much longer around.

Okay.

And then Marco maybe just as we think about both the ramp up of plan that engineering revenue that you talked about the push out coming back in <unk>.

Just how do we think about the margin profile in <unk> and the right jumping off point for 24, just given the moving pieces here. Thank you.

And we are let's say confirm me now.

Biology in Florida Bds segment, we see that are both shifting toward a high value solution happening.

<unk>.

We expect that to increase our gross profit margin compared to last year in the Bds segment on an adjusted basis, excluding the nonrecurring costs.

Franco Stevanato: On the engineering segment, is this demand largely monoclonal antibody or is there some GLP one demand out there? It's biologics, biologics is growing fast and biologics is an area where an injector pans play a major role that is a good driver not only for assembly line in devices, but also because in each of his devices there is a containment solution, high value containment solution that needs a visual inspection after feeling and most importantly ask more production high value solution in cartridges and syringes.

Associated to the desktop.

In engineering, we see a slight decline in the year compared to the previous one in gross profit margin.

But as discussed with David the other.

Actual we are putting in place is the key.

Cost management, especially in sales and marketing and G&A.

<unk> disclaims favorably towards the end of the year. So that's the reason why we are reiterating our guidance for 2023, we would expect also to adjusted EBITDA and the EBITDA for the year.

Okay. Thank you.

Franco Stevanato: So overall is a very interesting area of a business and biologics is the most important driver. And Paul just as a reminder during our capital markets say we did outline that we are serving GLP ones with engineering lines as well. Okay, thanks.

The next question is from Larry Solow of C. G S Securities.

Sabrina: Sabrina next question please.

Please go ahead.

Great good morning, or good afternoon, and thanks for taking my questions.

Just first question.

Doug You mentioned, a nice improvement are you seeing a good increase in demand in the vision inspection Assembly lines.

David Windley: The next question is from David Vindley of Jeffries, please go ahead. Hi, thanks. I wanted to come back to a couple of Derek's good questions. One on the the engineering revenue push out. If the straightforward question is, could you please quantify the revenue amount you talked about cost to cost. But, you know, if you would please quantify the revenue amount that got pushed out. You mean the shifting from Q3 to Q4? Yes, please. Yes, it's about the 526 million euro.

Just talking through and coming out of the capital markets day.

Your ability to leverage his engineering segment a lot of these customers who are you seeing that demand for the machinery.

<unk> is well on the DBS segment could you kind of just talk about that.

That dynamic.

Yes, you're right. There are many customers that use all of our vision is that current CFM or assembly lines.

So.

Our customer for a containment solution and mostly high value of containment solution. So the share of our customer.

Customer.

That we serve more Dennis with a single product line is increasing and is in line with our strategy to be a solution provider.

Marco Lago: Thank you. And then Marco, you said in your prepare. Marks, you made a comment about managing S-GNA costs closely. Both the sales and marketing and GNA lines were lower, both in dollar and in ratio percentage. Then we were looking for, I wonder, you know, on the point of managing those costs closely, do some of those costs need to come back? Was there some delay in spending given the lower revenue? Or are you, you know, managing to a more, efficient, you know, level of operation where you can sustain the lower levels that we're seeing in the third quarter.

We believe the depth of the integration integrated offering.

On the engineering provide benefit to customer in time, all of our short term time to market.

More simple supply chain for them better manage on top of a project and at the end.

The reduction of their total cost of ownership.

And the increased number of customers that they use more than one single product <unk> is increasing.

Marco Lago: We are carefully managing, not postponing cost obviously. So it's the second one. You can see we are well in line with our R&D expenditure. We are between 3.3 to 3.4% in the 9 months. So in line with our expectation. We have taken some cost in sales and marketing and GNA to manage efficiently our R&D.

Got it and just to clarify you guys. I know you don't guide to the quarter and you certainly don't guide.

Particularly to the quarter for this segment.

Just a follow up to a couple of questions.

Asked earlier I think by Derek on the just on the Bvs segment. So it sounds like that those numbers were essentially in line with your expectations, but the $5 million or so.

David Windley: Okay. And then last question for me, on the on the order book question, say closer to your IPO period, we were still in the pandemic. Lots of players were receiving orders that, you know, were clients were looking further out into the future, willing to do that because of supply chain challenges managing inventory, you know, higher levels of demand, you know, a lot of different reasons. And as a result of that, some of your backlog at that time would have lapped not only into the following year, but into the year after that.

Shortfall with relative to history.

Youre internally.

On the engineering piece correct.

Yes that correct that we are.

On our side.

Reiterating the double digit organic Godolphin Bds segment.

And this is a we can see the picture for the entire fiscal year.

With the strong growth in high value solutions that are expected to represent between 32% to 34% on total revenue. So we're reiterating this and as you said, we don't provide quarter after quarter guidance quarterly guidance and right.

David Windley: So, and if I bring that forward to current, that would be out into fiscal 25. Does your current committed order book include 25 orders or has that kind of compressed from a forward visibility timeframe standpoint and customers eyes, hope that question makes sense. You arrived the order partner, we experienced a change from the pandemic period to the now and that is more similar to the pre pandemic pattern. We have only small piece of control related to the engineering that is going behind the end of 2024, but is related more to the nature of the contracts rather than the fact that customer are ordering 18 months in advance as it happened during the pandemic.

Our picture is still the same.

Got you and that that guidance, obviously implies a pretty nice pick up in Q4, and I guess seasonally the Bds segment normally does pick up significantly in Q4.

And I assume that dynamic as it comes into play this year as well but.

Isn't that supply chain supply and you ramp that capacity.

That's helping that.

<unk>.

Trend even more.

Any thoughts.

Now back to you.

Already cover your question with the appropriate answer.

Yourself, because there is a combination of new capacity coming online specifically for high value solution that is more attractive in term of revenues at the same time there is some repetitive bought now.

David Windley: But also to say that it doesn't mean that our visibility in the future demand is short and then in the past, because at the meantime, we are developing a forecast and a nuclear agreement with customers that maintain or renounce our visibility for the future is the pace to flow. The Commitadors of the Puerto Rican thing to the order book that is changing but the visibility is still big and also higher and deeper than in the past.

The entire mobile ordering by customer then.

Driving this.

Distribution of our revenues along the year, but that they are increasing capacity is the most important driver because we are having more capacity and high value solutions.

Right and just.

David Windley: Understood, thank you for those answers, appreciate it.

Last question just on price any color there I imagine you've been getting a little bit more price this year.

Probably.

Increasingly over the last couple of years and inflation.

Obviously.

It's significantly more material.

Your expectations as we go forward you continue to expect to get price and not more in line with I guess.

Patrick Donnelly: Thanks Dave, Sabrina next question please. The next question is from Patrick Donnelly of CD, please go ahead. Hey guys, thank you for taking the questions. Franco, maybe one for you, as the corporate progress, did you see any change in behavior from biopharma customers? Just get a broad peer commentary around more cautious spend, maybe tighter inventory management from that customer base. Just curious what you saw and if things change at all, as the quarter went, September, October, whatever, maybe it would be helpful just to talk through the progression there.

Inflationary pressures are.

So our approach about the.

But I've seen.

Basically depending on value with respect of the value solutions not just based on some costs first of all.

Without the.

Hey, Shirley pressure remained shall we.

Last year, we discussed many time the sudden increase in the.

Cost of utilities in that Spa.

Specific items, but the approach suggests speaking as they say we are frequently recalculate in our cost basis, including inflation and price accordingly.

Franco Stevanato: I have to have a well understood your question, this correct me if I'm not giving the right answer. But in terms of the behavior of customer about orders in biologists, we see the tendency to secure the supply chain not only for the short time, but also for the long run. So we are engaged with the customers, important customer in planning our capacity according to their future needs. So the impact on biologists because of the inventory bills that union pandemic is very minor because you may recall that COVID-19 situation was overweight and in bias and biologics is mostly looking at the cartridges and syringes because also of the utilization of drug delivery devices.

Great. Thank you I appreciate the color.

Thank you. Thanks Sabrina next question please.

The next question is from Jacob Johnson of Stephens. Please go ahead.

Good morning, this is Matt on for Jacob.

Just a couple quick ones for me.

You highlighted at your Investor day that you're tied to roughly 70% biopharma companies.

New capacity and new product launches is there an opportunity for your win rate to be higher on new molecules coming to market. I know you mentioned the three out of four potential blockbusters, but just going forward I'd like to get a potential.

Mark there.

Yes, youre right in time of what we deliver during a market day and yes, we are.

<unk> engaged with the important blockbuster coming to the market.

Franco Stevanato: So the situation is normal in terms of the behavior customer to commit to orders, but he really high attention to secure the supply chain for the longer run. Okay, so you didn't really see a change as the quarter progressed with my or former customers nearly being a little more cautious. It was kind of status quo each month is the quarter. I don't see big changes in this direction, the only message I can deliver is that they need to get ready to meet the customer demands in the coming years is a good reason to work together with customer and they are very keen to have agreement with us for not only the short time but also the much longer run.

In the short term and to have a bigger volume in the future. There is no changes in this perspective I want to just to stress the fact that we.

We are talking about the biologics and time off.

Kind of molecules that come into the market and their needs are for biologics.

Perfectly matching our value proposition high value solution, and a high value containment solution, but.

Nothing different from what we delivered during the market capital market day.

Thank you.

And also.

You talked a little bit about contract in your capital markets day as well.

Just quickly what did you learn from contracting during COVID-19.

And it becomes when it comes to large demand projects and how does this impact GOP one contracts.

I cannot talk about any specific therapeutic area, but generally speaking when we discuss with customers the opportunities in the longer run we have a complex.

Marco Lago: Okay, and then Marco maybe just as we think about both the ramp up of plans that the engineering revenue that you talked about to push out coming back in 4Q. And is how do we think about the margin profile in 4Q and the right jumping off point for 24 just giving moving pieces here. Thank you. Well, we are, let's say, confirming our margin for a BDS segment. We see there are both shifting to a high value solution happening, and we expect to increase our growth profit margin compared to last year in the BDS segment on an adjusted basis, excluding the North Korean cost associated to the startup.

<unk> that to me fly different.

Engagement of the customer, including some support to Capex sometime so is case by case.

Yossi ACO auxiliary path there.

Starting point is the strong relationship we have.

And the fact that we can leverage on a loss and longer lasting.

Periods with this customer.

Great. Thank you for taking my questions.

Thank you Sabrina next question please.

The next question is from Matt Larew you.

William Blair. Please go ahead.

Marco Lago: In engineering, we see a slightly decline in the year compared to the previous one in growth profit margin, but as discussed with David, the other action we are putting in place is a cost management especially in sales and market engineering that is playing favorably for the end of the year. So that's the reason why we are reiterating our guidance for 2023, we respect also to adjust the beta and the beta for the year. Okay, thank you.

Hi, Sam Martin on for Matt.

There are just a few questions.

First and foremost building onto some of the questions that people ask me the contracts and the structure there.

A PR and other players apartment occupancies sort of spoke about a delay in revenue as a result of.

The misalignment between.

Customer response, and durability to improve lead times. So that's number one.

They already had.

For 2024.

T J.

No.

Sam.

This is Lisa I'm not sure I don't believe you've dialed in on the web phone. This morning. So we are having.

Larry Solow: The next question is from Larry Solow of CGS Securities. Please go ahead. Great, good morning or good afternoon, thanks for taking the question.

Difficulty hearing you we cannot hear your question really at all.

So I'm going to ask Sabrina to go to the next question. If you could dial in on the web phone I will send you the link immediately.

Larry Solow: I just just first question, you guys mentioned a nice improvement or you seem a good increase in demand and the vision, inspection, assembly lines and just talking through and coming out of the capital markets day, your ability to leverage this engineering segment or a lot of these customers who you know where you see that demand for the machinery or they customers as well on the BDS segment, you guys just talk about that dynamic. Yes, we are right.

The next question is from Jon <unk> of UBS. Please go ahead.

Hey, Thank you for taking the question I am actually dialed in it's one make sure you can you can hear me fine here.

Yes, we can.

Great Frank.

I appreciate the color on some of the sub segment level on Bds and just maybe on IBD would you be willing to quantify what the sizing of this is or what you're actually seeing on the non Kobe grew up there.

Larry Solow: There are many customers that use our vision and second system or assembly lines that also are customer for containment solutions and mostly high value containment solutions. So the share of customer that we serve more than with a single product line is increasing and is in line with our strategy to be a solution provider because we believe that the integrated offering leverage on the engineering provides benefit to customer in time, short in time to market.

Within media.

Oh.

We don't split the.

In these the taser their revenue I can.

Right for the massive that is in term of.

Valuing the total revenue.

Presented here is more bulk of revenues also in this segment and the mass is about our interest in the in vitro diagnosis linked to the <unk> view.

<unk>, because we can leverage and on the expertise of skill and knowhow that we apply for molecular diagnostic orphan drug delivery device space. So is this level of synergy that drive of this strategic attention tomo revenues represent a minor part of the business.

Larry Solow: More people supply chain for them, better management of our project and at the end, the reduction of their total cost of ownership. And the increase number of customers that they use more than one single product on my CG is increasing. Just to clarify, you guys, you don't guide to the core and you certainly don't guide. Particularly to the quarter for the segment.

Got it and just to clarify I guess the comments on ordering patterns in backlog demand but.

Are there any areas, where youre seeing destocking or restocking within customers and Bds.

Marco Lago: So just to follow up a couple of questions after earlier, I think by Derrick and just on the BDS segment. So it sounds like that, those numbers were essentially in line with your expectations, but the 5 million or so shortfall with relative to your internally was all on the engineering piece, correct? Yes, that correct. We are on our side reiterating the double digit organic growth in BDS segment, and this is how we can see the picture for the entire fiscal year with a strong growth in our value solution that are expected to represent between 32 to 34% on the revenue.

Okay, I'll repeat what we delivered in the past about.

Situation in buyers at MFS in consumable forever.

Diane yardstick of services.

But there are some things that they represent.

One part of a highly differentiated portfolio.

Our revenue so we are impacted the very.

Limited the way and as you know, we haven't been able to compensate that with the expansion in other therapeutic areas or product lines.

We're waiting of their space for high value solution for biologics.

I got it so just to clarify on that so I guess you know in drug containment solutions, you know theres not areas, where have you seen any customers destocking coming down.

Marco Lago: So we are reiterating this and as you said, we generally don't provide quarter after quarter guidance, quarter of the guidance. And I think our picture is still the same. Gotcha. And that guidance obviously implies a pretty nice pickup in Q4 and I guess seasonally the BDS segment normally does pick up significantly in Q4. I assume that dynamic comes into play this year as well, but whether that supply chain, that supply and you ran the capacity and I guess that's helping that, you know, trying even more.

No no no.

Is the opposite so we have to execute appropriately our capacity expansion plans to meet the desktop demand.

The opposite there is no.

This kind of.

Situations, you are referring to in the high value solutions.

Got it thank you for taking the questions.

As a reminder, if you wish to register for a question. Please press star and one on your telephone.

Okay.

Yes.

Once again E C.

Marco Lago: And it also, but you already cover your question with the appropriate answer yourself because yes, it's a combination of new capacity coming online specifically for high value solution that is more effective in time on the revenues. At the same time there is some repetitive pattern in terms of ordering by customer and driving these distribution of revenues along the year, but the increasing capacity is the most important driver because we are having more capacity and high value solution. Right.

Wish to ask a question please press star and one on <unk>.

Telephone.

So any further questions. Please press star and one on your telephone.

Miss mines gentleman that I have no more questions registered at this time.

Well. Thank you everyone for joining us today for the seven Auto group third quarter 2023 earnings call. We look forward to speaking with you in the future. Thank you.

Marco Lago: And just last question, just on price. Any color there? I imagine you've been getting a little bit more price this year. You've probably increasingly over the last couple years as inflation is obviously gotten significantly more material. Your expectations as we go forward, you continue to expect a good price and not more in line with, I guess, you know, what the inflationary pressures are. Now, what approach about pricing is basically depending on value with respect to the value solution, not just based on cost, first of all.

Ladies and gentlemen, thank you for joining the conference is now all of that you may disconnect. Your telephones. Thank you.

Okay.

Okay.

Yes.

Yes.

Yes.

We'll keep paying will go.

Right.

Yes.

Yes.

When you lap the shoulders.

Immune to teach me.

Marco Lago: Without the issue and the pressure you mentioned, last year we discussed many times the sudden increase in cost of utilities and other specific items that the approach is just speaking is the same. We are frequently calculating our cost basis, including inflation and price accordingly. Great. Thank you. I appreciate the color. Thank you.

Ed.

Tony.

These days become in Aberdeen.

Rounded.

The place that I can escape.

Ooh.

Yes.

Yes.

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Yeah.

Sabrina: Thanks for bringing the next question, please.

Okay.

Yes.

Jacob Johnson: The next question is from Jacob Johnson of Stephens. Please go ahead. Good morning.

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Yes.

Franco Stevanato: This is Mack on for Jacob. Just a couple of quick ones for me. You highlighted at your investor day that you're tied to roughly 70% bio-former companies with new capacity and new product launches. Is there an opportunity for your one-way to be higher on new molecules coming to market? I know you mentioned a three out of four potential blockbusters, but just going forward, I'd like to get a potential mark there. Yes, you're right.

Yes.

Yeah.

Okay.

Yes.

Yes.

Got it.

Okay.

These days I'm on.

Franco Stevanato: I think that I'm all about what we deliver during market day, and yes, we are Engaged with the important blockbuster coming to the market in the short end to have a bigger volume in the future. There is no changes in this perspective. I want to just to stress the fact that we are talking about the biologics in terms of kind of molecules coming to the market and their needs for biologics are perfectly matching our very proposition, high-value solution. But there's nothing different from what do we deliver during the market, capital market days.

Franco Stevanato: Thank you. And also, you talked a little bit about contracting your capital market as well. Just quickly, what did you learn from contracting during COVID when it becomes, when it comes to large demand projects? And how does this impact your P1 contracts? I cannot talk about any specific therapeutic area, but generally speaking, when we discuss with customer the opportunities in the long run, we have a complex agreement that may imply different engagement of the customer, including some support to topics sometime. So it's case by case, negotiation or observation, but the good starting point is the stronger relationship we have and the fact that we can leverage on a longer lasting experience with this customer.

Franco Stevanato: Great. Thank you for taking my questions.

Sabrina: Thank you.

Matt LaRue: Sabrina, the next question please. The next question is from Matt Larue of William Blair. Please go ahead.

Matt LaRue: Hi, I'm Martin on from Matt from William Blair. Just a few questions. So first and foremost, both of the questions that people ask about contracts and distrust are there. A peer or just another part of action space sort of spoke about the delay in revenue and result of the misalignment between the cost of very small and their ability to improve lead time. So we went to them, they weren't able to cut the preserve they had for 2024. I'm not sure I don't believe you've dialed it on the web phone this morning. So we are having difficulty hearing you. We cannot hear your question really at all.

Sabrina: So I'm going to ask Sabrina to go to the next question. If you could dial in on the web phone, I will send you the link immediately.

John Sourbeer: The next question is from John Sorbary of UBS. Please go ahead. Hey, thank you for taking the question. I'm actually dialed in this one. Make sure you can you can hear me find here. Yes, we can. Great. Franco, you know, appreciate the color on some of the sub-signal level on BDS and just maybe on IVD. You know, would you be willing to quantify what the sizing of this is or what you're actually seeing on the non-COVID growth there? Yeah. Tendelia.

John Sourbeer: John, we don't split in these days, the revenue, I can reinforce the method that is in the time of value in the total revenue is represented as more part of revenue social in the segments. And the message about our interest in the bit of analysis linked to the strategic view, because we can leverage in on expertise and how that we apply for molecular diagnostic, usually the drug may be very devised as space.

John Sourbeer: So is this level of synergy that drives the strategic attention to our revenue is to represent a minor part of the business. And just to clarify, I guess you have the comments on the ordering patterns and in backlog demand, but are there any areas where you're seeing your de-stocking or re-stocking within customers indeed yes? I can't repeat what we deliver in the past about the situation in bias and in consumable for diagnostic services, but it's something that represent one part of a highly differentiated portfolio in our revenue.

John Sourbeer: So we are impacted a very limited way. And as you know, we haven't been able to compensate that with the expansion in other therapeutic areas or product lines, overweating the space for high-veg solution for biologics. I got it. So just to clarify on that, so I guess you know in drug containment solutions, the there's not areas where you're seeing any customers de-stocking coming down. No, no, no. It's the opposite that we have to execute properly our capacity attention plan to meet the customer demand.

John Sourbeer: It's the opposite. There is no this kind of situation you are referring to in the high value solution. Got it. Thank you for taking the questions. As a reminder, if you wish to register for a question, please press a star and one on your telephone. Once again, if you wish to ask a question, please press a star and one on your telephone. Ms. Miles, Junkerman, there are no more questions registered at this time.

Lisa Miles: Thank you, everyone, for joining us today for the Stavinato Group 3rd quarter of 2023 earnings call. We look forward to speaking with you in the future. Thank you.

Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You made this connect to telephones. Thank you.

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