Q4 2024 Stevanato Group SpA Earnings Call
Come by and still Words don't come easily Like forgive me, forgive me But you can say baby Baby can I hold you tonight Baby
If I told you the right words, ooh, at the right time, you'd be mine I love you, it's all that you can say It's all that I can do
Words don't come easily Like I love you, I love you
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Speaker Change: Good afternoon, this is the Curvesco Conference Operator, welcome and thank you for joining the Stevanato Group, Fort Quarter and Year End 2024 Conference call.
Speaker Change: 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 signal an operator by pressing star and zero on their telephone.
Speaker Change: At this time, I would like to turn the conference over to Ms. Lisa Miles, Senior Vice President Investor Relations. Please go ahead, madam.
Thank you for watching!
Good morning and thank you for joining us.
Speaker Change: With me today is Franco Stevanato, Chairman and Chief Executive Officer, and Marco de Lago, Chief Financial Officer. You can find a presentation to accompany today's results on the Investor Relations page of our website, which can be located under the Financial Results tab.
Speaker Change: As a reminder, some statements being made today will be forward looking in nature, and only predictions.
Speaker Change: Actual events and results may differ materially as a result of the risks we face.
Speaker Change: including those discussed in item 3d entitled risk factors in the company's most recent annual report on form 20 F
Speaker Change: filed with the SEC. Please read our Safe Harbor Statement included in the front of the presentation and in today's press release.
Speaker Change: 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.
Speaker Change: Today's presentation may contain non-GAAP financial information. Management uses this information in its internal analyses
Speaker Change: 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.
Speaker Change: For a reconciliation of these non-GAAP measures, please see the company's most recent earnings press release. And with that, I will now hand the call over to Franco Stevanato.
Franco Stevanato: Thank you, Lisa, and thanks for joining us. Today, we will review our 2024 performance, address current market dynamics, discuss our four-quarter results, and provide 2025 guidance.
Franco Stevanato: We finished fiscal year 2024 with a positive four-quarter that was in line with our expectations. In 2024, revenue grew 2% compared to last year, driven by 6% growth in the biopharmaceutical and diagnostic solutions segment.
which offset the expected 70% decline from the engineering segment.
Franco Stevanato: Growth in the BDS segment was driven primarily by robust market demand for high-value syringes.
This helped drive a 15% increase in high-value solutions.
Franco Stevanato: which represented 38% of the total company revenue for fiscal 2024.
Franco Stevanato: We believe the success we are experiencing in high-value solutions also demonstrates that we are investing in the right markets, at the right time, as we ramp up syringes in Fisher and Latina to match customer demand.
Franco Stevanato: We expect that these investments will continue to drive near-term growth and allow us to capitalize on growing patient demand for biologic treatments such as GLP-1s, monoclonal antibodies, and biosimilar.
Franco Stevanato: The increasing availability of sensitive biologic treatments and patient adaption of self-administrated medicines are two key areas driving growth in integrated solutions and high-value solutions.
Franco Stevanato: In 2024, revenue from injectable biologics increased 24% year-over-year and represented 34% of the BDS revenue, compared to 30% of BDS revenue last year.
Additionally, in fiscal 2024, strong revenue growth in syringes
Franco Stevanato: coupled with growth in other product categories, helped to offset a 34% decline in revenue related to bulk and easy-fill vial. As you know, this temporary soft vial demand stems from the industry-wide vial destocking.
Franco Stevanato: We saw modest improvements at the end of the year, with some customers slowly returning to more normalized ordering, while other customers are still managing inventories.
Franco Stevanato: As a result, our thoughts remain unchanged, and we still anticipate a gradual recovery in vial demand in 2025, which we built into our guidance. We still expect that the market will continue to stabilize throughout 2025 with a faster recovery in bulk vias.
Franco Stevanato: During 2024, we also made significant progress on our growth investments, and we achieved two important milestones. First, we generated our first commercial revenue in Fisher Indiana.
Franco Stevanato: Second, our Latina project in Italy turned profitable at a gross profit margin level in the third quarter. Please turn to page 6 for a review of our expansion projects.
Franco Stevanato: In Latina, our teams are focused on the ongoing ramp-up of Storanger's capacity as part of the Phase I.
Franco Stevanato: Throughout 2025, we will continue installing, validating, and launching additional manufacturing lines to help satisfy growing customer demand. We are still in the early phase of scaling up this important gross investment.
Franco Stevanato: As you may recall, the next phase of our expansion in Latina will be dedicated to expanding Easyfield Carthage's capacity.
Franco Stevanato: This is a part of a larger program for a non-core customer expanding into ready-to-use cartridges.
Franco Stevanato: The design and planning are completed, and the core infrastructure build-out is expected to continue through 2025.
Franco Stevanato: As part of this project, the engineering team will be delivering our next generation easy-fill cartridges lines. We currently expect line installation to begin in early 2026.
Franco Stevanato: This is a market area where the demand environment has been more robust than we previously anticipated.
Franco Stevanato: We believe that our global leadership position and a long history, both legacy and new GLP-1s, position us as a partner of choice in this growing market. Turning to Fisher, we are making great progress and activities are advancing as planned.
Franco Stevanato: Our world-class facility is supporting U.S. customers across the full value chain and our investment is strategically focused to meet the high market demand for biologics.
Franco Stevanato: Alongside the launch of commercial production last quarter, we are installing and validating new syringe lines throughout 2025, as we scale this multi-year gross investment.
Franco Stevanato: In parallel, construction is underway on the build-out of our device manufacturing operation in Fischers. This effort is supporting a large customer with multiple device programs across a range of biologic treatments.
Franco Stevanato: We will support this U.S. global customer with a fully integrated solution with both our Nexus ranges and our device manufacturing.
Franco Stevanato: Commercial activities related to this new contact manufacturing work are expected to begin sometime between late 2026 and early 2027. Please turn to the next slide for a status update on our optimization plan for the engineering segment.
Franco Stevanato: The team made major strides during the quarter. We are on track to complete the previously delayed projects in 2025, with the majority expected to be completed mid-year. Right now, we are squarely focused on a successful completion and installation of these manufacturing lines at our customer sites.
Franco Stevanato: I am confident that we are moving in the right direction and our near-term efforts are yielding results. The next phase of our plan has a longer horizon. This includes optimizing our operational footprint, increasing efficiency by harmonizing our industrial processes, and streamlining activities into more defined structures.
Franco Stevanato: Our customers value our innovation in our top-tier products. We continue to see a favorable demand environment for our engineering segment, underpinned by the rise in biologics.
Franco Stevanato: Our efforts are designed to drive efficiency and productivity gains to best position the segment for long-term success.
Franco Stevanato: In summary, while 2024 was challenging, it prompted us to take action, to improve execution, drive operational improvements through footprint optimization, increase our efforts to streamline processes, and look for further areas to gain production efficiencies.
These ongoing efforts will improve our setup for long-term growth.
Franco Stevanato: Looking ahead, we believe we are uniquely positioned with an integrated value proposition to better serve customers' wide-ranging needs.
Franco Stevanato: Our long history of embedding science and technology to drive continuous advancements has led to a differentiated product portfolio. We operate in attractive end markets and have an increasing presence in biologics, which is the fastest growing market segment.
Franco Stevanato: We have developed next generation products such as our ALBA portfolio that are ideally suited to meet the scientific demands of highly sensitive drug products.
Franco Stevanato: We see a great opportunity driven by favorable macro tailwinds, such as aging population, the growth in biologics, and the rising patient adoption of self-administered injectable drugs.
Franco Stevanato: We are positioned in the company to take advantage of these opportunities to drive long-term sustainable growth. I will hand the call over to Marco for a review of our four-quarter results.
Marco: Thanks, Franco. Before I begin, I want to clarify that all comparisons refer to year-over-year changes, unless otherwise specified.
starting on page 10.
Marco: For the fourth quarter of 2024, revenue grew 3% to $330.6 million.
Marco: The impact of currency was neutral. Growth was driven by a 7% increase from the biopharmaceutical and diagnostic solutions segment, which offset the expected 16% decline in the engineering segment.
Marco: Revenue from high-value solutions grew 9% to a record $131 million in the fourth quarter and represented approximately 40% of total revenue.
Marco: This was driven by growing our premium performance syringes and, to a lesser extent, other product categories.
Marco: The solid performance in the fourth quarter helped boost our full-year mix of high-value solutions to 38% of total company revenue, in line with our expectations.
for the fourth quarter of fiscal 2024.
Marco: A strong mix of high-value solutions and year-over-year improvements in Fisher's and Latina partially offset the unfavourable gross profit margin impact from
Marco: vial destocking, including lower revenue from easy-fill vials, underutilization of vial lines, and the underabsorption of costs.
Marco: and lower gross profit margin in the engineering segment as we continue to execute our optimization plan.
Marco: As a result, gross profit margin for the fourth quarter of 2024 declined by 210 basis points to 29.7%.
Marco: Our new manufacturing plants in Fischer's and Latina improved year over year, but they are still expected to be dilutive to gross profit margin in the near term.
Marco: In response to industry-wide, soft-vial demand, we launched the initiative to curtail overhead costs.
Marco: without compromising future growth. We saw the benefits of this in the fourth quarter and operating profit margin increased 20 basis points to 20.2% for the fourth quarter of 2024.
Marco: As a result, net profit totaled $48.3 million, and diluted earnings per share were $0.18.
Marco: On an adjusted basis, net profit was $51.5 million and adjusted diluted EPS were $0.19 for the fourth quarter of 2024.
Marco: Adjusted EBITDA increased 5% to 90.9 million and Adjusted EBITDA Margin increased 50 basis points to 27.5%. Let's review segment results on page 11.
starting with the biopharmaceutical and diagnostic solutions segment.
Marco: As Franco noted, we see ongoing signs of stabilization in the vial market, with improvements in the second half of 2024 compared with the first half.
Marco: both in revenue and order intake for bulk and easy-fill vials. For the fourth quarter, revenue from the BDS segment grew 7% and 8% on a cost-on-currency basis to $279.4 million.
Marco: This was driven primarily by growth in high-value syringes, which offset a 14% revenue decline related to bulk and easy-fill vials. As expected, the drop was larger in our more accretive easy-fill vials.
Marco: Revenue from high-value solutions grew 9% to a record of $130.6 million in the fourth quarter.
Marco: reaching 47% of BDS segment sales. Revenue from other containment and delivery solutions increased 6% to $148.8 million, mostly due to higher sales tied to contra manufacturing activities.
Marco: A strong four-quarter contribution from high-value solutions and improvements in fishes and Latina as we continue to scale, help to partially offset the margin impact from vial destocking.
Marco: As a result, in the fourth quarter, gross profit margin declined 250 basis points to 31.1%.
Marco: For the fourth quarter of 2024, actions we took during the year helped to moderate the decline in operating profit margins.
which decreased 40 basis points to 23.3%.
Revenue from the engineering segment decreased 16% to $51.2 million.
Marco: Performance in the business was mixed, with expected revenue declines in glass conversion and visual inspection, or set in growth in assembly and packaging.
Marco: As expected, gross profit margin for the fourth quarter decreased to 18.6%.
Marco: Optimization and cost management initiatives help to maintain operating profit margin consistent at 15.3% compared with the same period last year.
Marco: As our results demonstrate, the steps we are taking are helping to improve the segments operating and financial results.
Marco: We believe these actions will better position the segment to capture future opportunities.
and improve the overall health of the business.
Marco: Please turn to the next slide for a review of balance sheet and cash flow items.
Marco: We ended the year with cash and cash equivalents of 98.3 million and net debt of 335 million.
Marco: With our current cash on hand, available credit lines, cash generated from operations, and our ability to access additional financing, we believe we have available liquidity to fund our strategic and operational priorities.
over the next 12 months.
For the full year 2024, capital expenditures totaled $286.6 million.
Marco: 89% of CAPEX was deployed for growth projects, to meet rising demand for high value solutions.
Marco: For the full year 2024, net cash from operating activities total $155.8 million, a substantial improvement from the previous period.
Marco: Cash used in the purchase of property, plant equipment and intangible assets was 313.6 million.
Marco: The combination of increased cash flow from operations and lower capex helped drive a significant year-over-year improvement in free cash flow.
Marco: For fiscal 2024, this resulted in a negative free cash flow of $148.5 million, compared with a negative $333.9 million in fiscal 2023.
Lastly, on slide 13 we are establishing 2025 guidance.
We expect revenue in the range of 1,160,000,000 to 1,190,000,000.
Marco: Adjusted EBITDA in the range of $293 million to $306.3 million and adjusted diluted EPS in the range of $0.51 to $0.55
Marco: Our 2025 guidance considers headwinds and tailwinds, and we have assumed the following factors.
Marco: Revenue will be stronger in the second half of 2025 compared with the first half.
Marco: We expect a step down in revenue in the first quarter of 2025 compared with the fourth quarter of 2024.
with revenue expected to grow sequentially throughout the year.
Marco: The BDS segment is expected to grow mid to high single digits, driven principally by growth in high-value syringes. For the engineering segment, we have assumed that neutral to low single-digit growth compared with 2024.
Marco: As we focus efforts on execution, we expect that high-value solutions will range between 39% to 41% of full-year total revenue.
turning to gross profit margin on a consolidated basis.
Marco: We currently expect that gross profit margin will improve by approximately 100 to 140 basis points.
Marco: compared with 2024, driven by continued improvement in Latina and Fischer's as our capital investment project scale, as well as increased contribution from high-value solutions.
Marco: We also anticipate some headwinds. While Latina and fishes are expected to improve year over year, they will still be dilutive to margins, and we expect higher depreciation in 2025.
Marco: We expect depreciation and amortization will range between 8.7% to 9% of expected sales, which reflects the range of revenue in our guidance.
Marco: Currency is expected to be neutral compared to 2024. We are assuming a tax rate of approximately 23% and weighted average shares outstanding of 272.9 million.
Marco: And finally, capital expenditures and free cash flow. For 2025, we have assumed capex in the range of $310 million to $340 million.
before customer contributions and prepayments.
Marco: Our 2025 plan reflects an acceleration of capex related to the build-out for easy-fill cartridges at the request of a large customer. We had previously expected this spending to occur in future periods.
Marco: Net of contributions and prepayments, CAPEX is expected to range between 250 and 280 million.
Marco: Regarding free cash flow, in 2025 we expect increased operating cash flows and higher contributions for CAPEX.
Marco: This will help drive continued improvement in free cash flow in 2025, with an expected range between negative $40 million and negative $60 million for the full year.
I will hand the call back to Franco.
Marco: Thank you Marco. In closing, we remain focused on executing our key priorities and achieving our long-term objectives. We operate in growing and market with favorable secular tailwinds and we have several reasons to be confident in our strategic direction.
Marco: First, we continue to deliver organic growth, driven by solid demand for high-value solutions, the main pillar of our long-range construct.
Marco: We are investing in the right areas to meet the rising customer demand, and we have a growing presence in biologics.
Marco: Second, we expect to increasingly benefit from the new capacity projects as we advance our ramp-up activities and drive profitable growth.
Marco: In 2025, we expect that these projects will be diluted to gross profit margin, and in 2026, we will begin to realize the benefits of scale and productivity gains as the projects mature.
Marco: Third, the vial market continues to gradually recover and stabilize. We remain optimistic that as the vial demand continues to normalize, we will see a return to historical market volumes and growth rates.
Marco: Finally, we are making meaningful progress on a clear and actionable plan to improve our operational and financial performance in the engineering segment.
Marco: All in all, the fundamentals of our business remain strong. We have an excellent market position and we continue to innovate each and every day. Our unique value proposition and integrated offerings make us a partner of choice for customers.
Speaker Change: As CEO, I am firmly committed to putting the business on the right path to return to double-digit growth, expand margins, and build shareholder value. We believe we have all the ingredients in place. Operator, we are ready for questions.
Speaker Change: Thank you. This is the Coruscant conference operator. We will now begin the question and answer session.
Speaker Change: Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. To remove yourself from the question queue, please press star and 2.
Please pick up the receiver when asking questions.
Speaker Change: Anyone who has a question may press star and 1 at this time. We will pause for a moment as participants are joining the queue.
Thank you for watching!
Operator: First question is from Michael Riskin, Bank of America. Please go ahead.
Michael Riskin: Great, thanks for taking the questions and congrats on the quarter. I've got two questions. I'll
Michael Riskin: Go through them quickly. First, on the vial recovery, sounds like...
Michael Riskin: Bio, especially bulk vials, continues to, you know, gradually normalize. You've kind of talked about that trend for a number of quarters now, it's moving in the right direction. Any additional color you can provide on when you think things will be fully back to normal? Do you expect the vial environment to...
Michael Riskin: sort of be fully recovered in the middle of 2025 or are you still working through it for the rest of the year? And now we've got a follow-up.
But
Good morning Mike, Franco Stevanato speaking.
Michael Riskin: So our main takeaway after having a very strong interaction with practically all our customers, big customers and also the regional customers, is that we are confident that 2025 will be much better than 2024, how we are going to translate this, because we see
Michael Riskin: sign up everywhere where we see big international customers and regional customers that are starting to return to normalize ordering partners. So overall we see that during this 2025 there will be a gradual recovery throughout all the year.
Thank you for watching!
Okay.
Michael Riskin: how those projects need to ramp and how those facilities need to ramp for them to go from being margin dilutive to margin accretive what's the timescale on that or sort of the volumes need to be pushing through those new that new capacity where that goes from being a headwind to a tailwind
Speaker Change: Thanks for the question, Michael. First of all, as you know, Latina is a little bit ahead compared with Fischer's.
Speaker Change: We started generating positive gross profit in Q3 2024 in Latina, and we are keeping on improving and ramping up the revenues.
Speaker Change: We expect there, by the end of 2025, to have a normal gross profit margin with respect to the high-value products we are producing there.
Speaker Change: Fischer's is a little bit different because it's a larger plant, it's a green field, and basically, as you know, we have two, three quarters of delay in the program compared with Latina. We are fully in line with our plan, but it's about three quarters after.
Speaker Change: There, we are very happy with the results. Thank you for... We started generating...
Speaker Change: We expect to turn a positive gross profit in fishers in the second half of 2025. So matter of fact, 2025 will still be dilutive for our gross profit margin in the combination of the two new plants.
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Great, thanks so much.
Speaker Change: Next question is from Mate Larrow, William Blair. Please go ahead.
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Speaker Change: Hi, thanks for taking the question. I want to follow up on my first question around VILE. That was last year.
Speaker Change: you guided us to down 35% for the year, and generally came in line with that. Is there any way you can help us with what we should expect for 2025? And maybe as part of that, you know, when are you assuming a return to positive growth in vials? Do you get that in the second half of this year?
Speaker Change: Yes, thanks for the question. Marco is speaking. First of all, as Franco mentioned, we can see some signal of improvement in the last quarters. Both revenue and orders intake were better in the second half of 2024 compared with the first half.
Speaker Change: You're right, we went down 34% in the year. In the last quarter, we went down 14% year over year. So we can see some signal of improvement. Going to your question, we are currently modeling a grow in bias for 2025.
Speaker Change: from mid-single-digit to high-single-digit and as Franco mentioned we see progresses throughout the year, quarter after quarter, we expect a sequential improvement.
Thank you for watching!
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Speaker Change: Great, thank you. And then you referenced in the script the investments you're making in your device manufacturing operations and called out both NEXA and ALBA, you know, I think some heightened attention on devices and where they fit.
Speaker Change: for the traditional packing players long-term. Can you just talk a little bit about your success there, as well as your efforts and expectations around scale and the ability to profitably scale those programs over time? Go ahead.
practically in our strategy
Speaker Change: for Stevanato Group is really to serve an integrated solution and product portfolio to our biologic customers.
Speaker Change: In the last year, we developed our IP, auto-injector, and pen. Also, more and more, for many customers,
Speaker Change: We are building an R&D, even more, some plants that are able to serve Nexa syringes, Alba syringes, like in the case that we have in Fisher. We are building also a lot of capacity for one of our big customers in the United States.
Speaker Change: We are going also to serve this device with this program.
Speaker Change: So today we have a certain number of programs through the CMO business model and also a certain number of programs through our IP pen health injector that we will sell from the German plant in order to fulfill this increasing request from our biologic customers. That is looking Stevanato not only for glass syringes, not only for cartridges, but also like a holistic partner where they can buy the glass and the devices.
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Okay, thank you.
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Next question is from Patrick Donnelly, CT. Please go ahead.
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Speaker Change: Hey, thanks for the question guys. Marco, maybe one for you just on the pacing of the year.
Speaker Change: You know, it sounds like just seasonally, 1Q set down from 4Q on red, no big surprise there. Can you just help frame up, you know, the quarters, the progressions we go through here, both revenue and then the margin side would be helpful as well, just to think about the cadence of the year as we work our way through here.
Thank you for watching!
Speaker Change: Sure, we expect sequential growth, quarter after quarter, in 2025, with a stronger second half of the year compared with the first half.
Speaker Change: mainly for three reasons. First, we can see strong demand in high-value syringes and these derailled cartridges.
Speaker Change: But at the same time we are ramping up capacity. We expect to install several lines in fissures between May and June.
Speaker Change: So, matter of fact, after the validation, we will have available capacity to satisfy the strong demand. So, for this reason, we expect stronger revenue in the second half. The other reason is related to vials. We mentioned before the fact that we expect the market
Speaker Change: will be sequentially better toward the end of the year. And the third reason is related to engineering. We are working hard and obtaining good success in recovering the delay we are delivering.
several complex projects in this period of time.
Speaker Change: And we expect to complete the recovery around the middle of the year. So we have the opportunity in the second half of the year to take more workload and increase our revenue also in engineering.
Speaker Change: That's why we are confident that in the second part of the year the revenues will be stronger.
Thank you for watching!
Speaker Change: you know, things like Mexico, we'll see what happens with Europe, uh, just what you think there. And then on the back of that,
Speaker Change: you know, some of these trial cancellations, HHS going after things like bird flu, and maybe some of the BARDA contracts. We'll be curious, just your perspective on some of these recent changes, what your guys' exposure is, how you're thinking about.
Thank you guys so much.
Thank you for the question.
Franco Stevanato: Today, practically what we have done in Stevanato Group since the last 15 to 20 years, we build a sophisticated supply chain where we try to be domestic in the measure growing pharmaceutical area all around the world. Today we have several plants in Europe, United States, in Asia, able to serve to our customers the same product from different regions.
Franco Stevanato: So on the top of this, we can add that we have a very strong...
Franco Stevanato: partnership in a proactive way with our customer and we are trying to monitor in the best way how eventually to review the supply chain with our customer from the different region. So we are putting a lot of attention together with our customer how to approach if there will be some evolution.
Franco Stevanato: But the good news is that we have a good footprint with the same standard of quality everywhere and the fact that we have decided to approve this big investment in Fisher Indiana three years ago, it will make us even more proactive to react to any type of change.
Thank you for watching!
Speaker Change: Then Patrick, I don't know if your question was about vaccine, just to...
Speaker Change: make sure it's a limited risk for us because we are generating about 8% of our revenue of BDS in vaccine but
Speaker Change: The focus is predominant in Europe. We are today generating around 1% of our revenue in the U.S. with vaccines, so it's not a big risk for us today.
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Great, that's really helpful, thank you guys.
Next question is from David Windley, Jeffries. Please go ahead.
David Windley: I was hoping, thanks for taking my questions, good morning, I was hoping you could comment on the utilization levels or maybe relative utilization of your lines across the different form factors, so syringe, cartridge.
and Bile.
David Windley: What I'm digging for is, with vials down as much as they are, I'm sure the utilization is low.
David Windley: and how much that can recover and how we should think about that translating to margin. But then also, on the other end of the spectrum, you're adding capacity for cartridge.
David Windley: and should I correctly interpret that as you're being at very high levels of utilization in your existing cartridge capacity. So just again trying to understand your relative utilization levels of each of the different types of production.
David Windley: Thanks Dave for the question, Marco speaking. So, first of all, we have strong demand in syringes, so we are utilizing a lot the syringes line and as you know we are also ramping up capacity to match the long-term demand we have with the key customers.
David Windley: We have a similar situation with cartridges, but I will let later Franco to explain more the Easyfield cartridges project.
David Windley: About VIAS, obviously after going down 34% in revenue last year, we have available capacity both in bulk and in easy fill for obvious reasons. So we still have...
David Windley: ability to grow there. We expect to grow in 2025 compared with 24, but we still have available capacity.
Yeah.
and David.
Franco Stevanato: We can say that for what is related to the high-value product, our demand is driven by the capacity that we have put in place. We started in Piumino years ago. Now we are heavily investing in Latina and also in Fisher.
Franco Stevanato: Today we have a lot of requirements from around the NEXA syringes, a lot of requests about ALBA syringes for particular applications. There is more and more an increase in demand for cartridges.
Franco Stevanato: ready to fill. In particular, we have one big customer that really has decided to increase their capacity in the next year around this type of product. Even more, there are several tens of
Franco Stevanato: our program around cartridges ready to fish. So our big focus is really to implement capacity for high value products where we see the higher demand in 2025 most of the next year.
Thank you for watching!
Speaker Change: Is that, on the cartridge program for the specific customer, is that going to be dedicated capacity, or do you expect...
to be able to diversify that.
Both of them.
Speaker Change: We have one big Angkor customer that is placing a big contract where they want to serve a big quantity on Cartagena field, but it is also true that we see more and more, we have several...
Speaker Change: Thanks to our mid-sized customer, Biologica Biosimilar, they are going through this type of application. It's very simple because they are putting in place capacity, but they want to outsource to partners like us, the washing, siliconization, sterilization.
Speaker Change: So this is why we are heavily investing. We have already capacity here in Piedmontese. We are going to invest also in Latina with a lot of capacity, in order to be ready to approach these nice tailwinds.
Speaker Change: And if I could ask one more on capacity, I think, maybe I missed it, but relatively new to my eyes was the mention of devices in fissures and adding capacity there for that.
Speaker Change: Could you help us to understand, I understand the kind of strategy of being able to provide the client with both the glass as well as the device.
Speaker Change: Can you help us to understand what your longer-term expectations are for the margin contribution of the devices, or said differently?
Speaker Change: Is that a positive evolution of your business mix to pursue?
Speaker Change: supply of those devices, or are those device margins, you know, eventually going to be lower than your high-value glass margins? Thanks.
Thank you for watching!
Speaker Change: Thanks Dave for the question. We have a different situation in device when we talk about CMO contracts and proprietary solutions. We are working on both.
Speaker Change: and our strategy is obviously to become a reliable partner on both. When we talk about proprietary device, it's an iValue product and the range is the normal one in iValue products.
Speaker Change: about 40% I'm speaking. In CMO space the margins are lower, we are talking between 15 to 35% in line with other containment delivery solutions.
Thank you very much.
Yeah.
Speaker Change: If I can, David, give you a different angle, more from a business point of view.
Speaker Change: If you look at the growth in biologics in the next years, there will be a nice double-digit growth on syringes like Nexialba.
Speaker Change: In parallel, there are the equivalent growth on 10 healthy ingestors. So our goal is to go to our customer and to show the full value proposition, no matter if it's through our IP product or through the business model of CMO, because this will help us to capture more market share and more growth. And this is why...
Speaker Change: The plants that we have in Fisher have this flexibility, it's considered by our guest customers like UnHub, where they can have the integrated solution service that is a little bit unique in this moment in the United States. And we are taking benefit from this.
Thank you for watching!
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Thank you, I appreciate the answers. Thank you.
Larry Solo: Next question is from Larry Solo, CJS Securities. Please go ahead.
Larry Solo: Hi, good morning. It's Pete Lucas for Larry. You covered most of my questions. Just on the engineering segment, recovery sounds like it's progressing. Can we expect SegWit operating margins to return to mid-teens levels over the course of the next few quarters? And perhaps build on that, if you could just give us some color there. Thanks.
Larry Solo: Yeah, you have noticed we reached mid-15% in Q4, so we are happy with the progress we are making.
Larry Solo: We are not yet at the level we were in 2023, but we are progressing. Our goal is to complete the, let's say, delay issue by mid of next year.
Franco Stevanato: But the further step, as Franco was explaining, is a further optimization to further improve our profitability in this segment.
Yeah.
Franco Stevanato: If I can further add a more business call, the team made a big improvement during this quarter. Today we are on track to deliver our discomplex line to our customers. Our target is to complete this delivery at the middle of the year. This will help to further improve the revenue marginality.
Franco Stevanato: In the meantime, together with the organization, we are going to review what is the cost structure. Also, we are going to review the size of our plant in order to make more efficiency in our operation, both in Denmark and in Italy, and also prepare for the future growth.
Franco Stevanato: Today, the problems that we are serving to our customers from an engineering point of view are very well perceived because there is a big growth in biologics.
Franco Stevanato: and there is a high demand for assembly technology on the industry because of this device trend. Maybe more from a regulatory point of view, there are more and more requirements from new sophisticated inspection line is exactly where we want to focus the division in the next years.
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Very helpful, thank you.
Next question is from Anna Snopkowski, KeyBank. Please go ahead.
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Anna Snopkowski: Hi, this is Anna on for Paul Knight. Thanks for taking my questions.
Anna Snopkowski: First, could you frame the revenue-generating capacity of the Fishers facility?
Anna Snopkowski: I know in the past you've mentioned you anticipate more meaningful revenue contributions here in fiscal year 25. But what is the utilization rate you expect for 25? And then just how is overall demand trending here versus initial expectations?
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Speaker Change: Thanks, Anna. If I got your question, it's a matter of the speed we ramp up, so we expect to complete the...
Speaker Change: the full capacity ramp-up in fishers by 2028, so we are still progressing. We are pretty happy with the evolution, we reached our milestone in
Speaker Change: Q4 2024. We are progressing with new lines installed, but most importantly, more validations from our important North American customers.
About 2025, obviously we expect...
Speaker Change: But we still have room to install more capacity in 2026, 2027 and 2028.
Thank you for watching!
Okay, perfect. And then maybe just looking at the engineering.
Speaker Change: Once the operational changes are executed over the next 12 months, what do you think this business could run at in terms of adjusted EBITDA margins over the long term?
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Speaker Change: Well in the long term we confirm our view we share about the medium to long term construct. We basically want to expand our margin increasing also after sales activities.
Thank you. Bye.
Franco Stevanato: We expect to be more accretive than we were before these problems we face in 2024, but keeping on improving, also through the optimization plan Franco mentioned in his remarks.
Speaker Change: but we are confirming the trajectory we share with you during Capital Market Day.
Speaker Change: Our goal for the engineering division is to keep in the next years high single digit growth thanks to the fact that we want to further reinforce our position inspection system in assembly technology with the high-speed machines, also increase the percentage of their sales to our major customers.
Thank you.
Thank you.
Speaker Change: Next question is from Peja Savan, Morgan Stanley. Please go ahead.
Hey guys, good morning, and thanks for the time here
Franco, I have a question for you on high-value solutions.
Speaker Change: is sold in the U.S. and what percent of that U.S. HVS revenue is manufactured locally. It's sort of related to, you know, the potential impact of tariffs that I'm trying to get at. And on a related note.
Speaker Change: Is there an opportunity for you guys over the next couple of years here to leverage your global footprint and flex where you supply from? Depending on tariff regimes. I mean, is that a competitive differentiator that is starting to resonate in RFPs just yet?
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Speaker Change: A lot of questions together, thanks. First of all, we are generating North America.
about 26% of our revenue.
Speaker Change: The concentration of high-value solutions is stronger in North America, but we don't disclose the exact number.
Speaker Change: And this is exactly the reason why we are investing so heavily in e-fishers to gain customer proximity and serve them through our high-value products.
Speaker Change: and this is also why we are, as Franco mentioned before, we are confident to manage also the tariff issue because we are becoming
local and domestic in many different countries.
and please...
Speaker Change: Maybe I can reinforce from a business point of view, our strategy since a few years in particular, from the moment that we have done the IPO in New York, is really to invest, to focus Stevanato Group on a high value product. Today we are heavily investing capacity, nearly fully dedicated to high value product in Pio Minodese, in Latina, and also in Fisher, for the purpose really to follow this growing demand in biologics.
Speaker Change: with our international customers that want to supply them partners that are present in different regions. If you look at the investment that we have done in Latina in the last year are dedicated to Nexus ranges that is high value product and now we are adding capacity on cart as you say to fill that also is high value product.
Speaker Change: We are mirroring exactly the same in Fisher where we are building capacity for syringe and extra configuration, then we will add capacity for vial ready to fill for ALBA technology. Our goal is to...
Speaker Change: is to become the global partner with a global footprint that is able to have a very sophisticated, flexible supply chain with the same standard of quality, but our goal is to focus on high-value products in the next.
Yes.
Thank you for watching!
Speaker Change: Got it, that's helpful. And then a quick follow-up on Fishers, I think you guys had an agreement with BARDA there for, you know, BARDA funding about $95 million of capacity expansion for your standard and easy-fill vials at the site.
Speaker Change: Is that contribution essentially de-risked or is there a possibility that that could come under scrutiny under the Trump administration?
Speaker Change: Correct, during COVID we signed this contract in order really to build dedicated capacity for VIAL in bulk, it's a configuration dedicated for the S-Market. Today we are in execution to build the capacity in alignment with the contract.
Speaker Change: I just want to clarify the Tejas that we have had no indication from the government or from BARDA that there is any risk to that existing grant from them. Correct.
Speaker Change: Perfect. Thank you guys. Appreciate it. Thank you. Next question, please.
Speaker Change: Next question is from Do Sanco Wolf Research, please go ahead.
Thank you for watching!
Speaker Change: Good morning, good afternoon. Thank you for taking my questions. I have two. One is...
Speaker Change: Just given the change in administration and the current geopolitical environment, I'm wondering if through the first two months of Q1, if you have seen any change in customer behavior, any stalling across different geographies, different product categories.
Speaker Change: and if so you know how you have factored that into your guidance keeping in mind you did tell us to model more growth in the back half than the first half.
Speaker Change: So that's the first topic and then the second topic is just another follow-up to a series of official questions
as Fisher opens up when it is fully ramped.
Speaker Change: How much of high-value production in the U.S. can be supported by that facility? Again, that relates to the geopolitical environment and tariffs. I'm just wondering, when that is fully ramped, how much of your expected U.S. demand you expect could be serviced by that facility. Thank you.
Speaker Change: So just to sum up today, we have a contact, we don't see any changement with our customers. We are just executing all the contracts we have already signed last year, two years ago with our customers. Today the focus is together with them to install capacity to do the validation, execute in particular in Europe, in particular in the United States.
Speaker Change: For what is related to Fischer, our goal is to be in full capacity at the late of 2028 and we are continuing to install this capacity for high-value products, practically, in terms of syringes, like I mentioned to you, in terms of particular configurations of syringes.
Speaker Change: and also for what is related to VIA ready-to-fill. We also, like we mentioned before, we have this agreement with BARDA that is referring to easy-fill VIA and also with bulk VIA.
Speaker Change: We also have to remember that the fissure we have done with the Phase I, when we have acquired, we have decided to install capacity fissure, we purchased a very big land because we have decided to become a domestic United States with a view of long term, like we have done in Europe. So we now want to execute until 2028 the Phase I, but we have space in the next year to go to Phase II.
Speaker Change: So in order really to be flexible and proactive to approach any type of market opportunity in the United States with our biologic customers.
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Thank you again.
Thank you for watching!
Speaker Change: Next question is from Odysseus Manisiotof, BNP Paribas, please go ahead.
Thank you for watching!
Speaker Change: Hi, thanks for taking my questions here on behalf of Hugo. I've got two, please. Firstly, could you provide a clarification on vials in the 34% decline in vial sales, where it seems the decline was more pronounced in easy fill than bulk vials?
Speaker Change: Can you share the split of declines between Isiso and Bulk, or at least the magnitude of the difference between the two? And secondly, on the CapEx guide, could you clarify how the customer contribution will be recognized? Is it fair to assume that the
Speaker Change: 250 to 280 million will be the expected reported figure that we should use for free cash for the next year.
Thank you for watching!
So I'll start from the second question, we are
Speaker Change: receiving balance sheet contribution in the form of prepayment or contribution to our investment during 2025. We expect to receive approximately 60 million between prepayments and contributions.
Speaker Change: to help us in financing the expansion on important high-value product projects. So, the guidance is...
Thank you. Bye-bye.
Speaker Change: between $250 million to $280 million net of repayment and contribution.
Speaker Change: About the split of the bulk and sterile decline, we don't split exactly the amount, we reinforce the message that during 2024 the decline was stronger in sterile vials.
Thank you. Bye.
Speaker Change: But basically it depends quarter after quarter, there could be fluctuations quarter after quarter, but we prefer to disclose consistently with previous quarters the bundle of the vials rather than going into specific details.
And there's two, thank you.
Thank you for watching!
Operator, next question please.
There are no more questions registered at this time.
Speaker Change: Okay, thank you operator. I think Franco Stevanato would like to make a couple of closing comments.
Franco Stevanato: I would like just to summarize a little bit all the questions that you raised.
Franco Stevanato: the demand of our customers. From market point of view, we continue to see high demand for high value products in the different primary packaging configuration. There is a very high demand of injectable and more and more we see a very high demand from customers to have integrated solution system.
Franco Stevanato: We continue to see positive signals well spread in all the regions about the recovery of the Valle. This is also important. Also, the engineering individuals have made meaningful progress in order to deliver on track this complex line.
Franco Stevanato: So, we are happy for 2025, but even more, we are confident to confirm what we shared during the Capital Market Day in New York, our ability to target 30% of EBITDA and to have to target 40-45% of our high value solution in the next year, in 2027.
Franco Stevanato: So this is where the company today is fully focused to execute this year.
Franco Stevanato: Thank you and that concludes the Stevanato Group fourth quarter and year end 2024 conference call. Thank you for joining us. Have a good day.
Thank you for watching!
Thank you for watching!
Speaker Change: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Starin' Road The Lollies, The Lollies, The Lollies, The Lollies
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