Q2 2025 Stevanato Group SpA Earnings Call

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Coursecall Conference Operator: Good afternoon. This is the Coursecall conference operator. Welcome, and thank you for joining the Stevanato Group S.p.A. second quarter 2025 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 signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Ms. Lisa Miles, Investor Relations. Please go ahead, Madam.

good afternoon. This is a chorus call conference operator. Welcome and thank you for joining the 7at second quarter, 2025 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 signal an operator by pressing star and zero on their telephone.

At this time, I would like to turn the conference over to Miss Lisa Mi investor relations. Please go ahead. Madam

Lisa Miles: Good morning, and thank you for joining us. With me today are Franco Stevanato, Chief Executive Officer, and Marco Lago, Chief Financial Officer. A presentation to accompany today's results is available on the investor relations page of our website under the Financial Results tab. As a reminder, some statements being made today are forward-looking and based on current expectations. Actual results may differ materially due to risks outlined in item 3D risk factors of our most recent annual report on Form 20-F filed with the SEC. Please review the safe harbor statement included at the beginning of today's presentation and in our press release. The company undertakes no obligation to revise or update these forward-looking statements except as required by law. Today's presentation may include non-GAAP financial information.

Good morning and thank you for joining us.

With me today are Franco stevanato, chief executive officer and Marco, delago Chief Financial Officer.

A presentation to accompany today's results is available on the investor relations page of our website, under the financial results table.

As a reminder, some statements being made today are forward-looking and based on current expectations, actual results May differ materially due to risks outlined in item 3D risk factors of our most recent annual report on form 20f filed with the SEC.

Please review the Safe, Harbor statement included at the beginning of today's presentation and in our press release.

The company undertakes, no obligation to revise or update these 4 are looking statements except as required by law.

Lisa Miles: Management uses these measures internally to assess performance and believes they may be helpful for investors in evaluating the quality of our financial results, identifying trends in our performance, and providing meaningful period-to-period comparisons. For reconciliation of these non-GAAP measures, please refer to the company's most recent earnings press release. With that, I'll hand the call over to Franco Stevanato.

Today's presentation, may include non-gaap financial information.

Management uses these measures internally to assess performance and believes. They may be helpful for investors in.

Evaluating the quality of our financial results, identifying Trends in our performance and providing meaningful period to period comparisons.

For reconciliation of these non-GAAP measures, please refer to the company's most recent earnings press release. And with that, I'll hand the call over to Franco Stevanato.

Franco Stevanato: Thank you, Lisa, and thanks for joining us. Today, we will review our Q2 performance, share updates on our investment projects, and discuss the current market environment. We delivered another solid quarter marked by top-line growth, a higher mix of high-value solutions, and expanded margins. These results keep us on track to achieve our full year 2025 guidance and reflect the continued momentum of our strategic roadmap. In Q2 2025, revenue grew 8%, led by strong performance in our biopharmaceutical and diagnostic solutions segment, particularly in our core drug containment business. Notably, this growth offset a 2% revenue decline in the engineering segment as we continue to advance our business optimization plan. The solid performance in the BDS segment is underpinned by favorable secular tailwinds, especially the continued rise in biologics, which is fueling strong demand for our products.

Thank you Lisa and thanks for joining us today. We will review our second quarter performance share updates on our investment projects and discuss the current market environment. We deliver another solid quarter marked by Top Line growth, a higher mix of high value Solutions and expanded margins this results. Keep us on track to achieve our full year 2025 guidance and reflected the Continuum momentum of our strategic road map.

In the second quarter of 2025 Revenue grew 8% led by strong performance in our bioharmony.

The solid performance in the BDS segment is underpinned by favorable secular tailwinds.

Franco Stevanato: The spending capacity in Latina and Fishers is a direct response to market demand, and our new facilities are already contributing to near-term growth as we scale volumes and generate revenue from high-value products. In Q2, high-value solutions accounted for 42% of total revenue, driven primarily by growth in high-value syringes and, to a lesser extent, EZ-fill cartridges and EZ-fill vials. We are also seeing encouraging signs of ongoing stabilization in vial demand as the effects of the stocking continue to ease. Turning to the engineering segment, Q2 revenue was largely in line with our expectations, but margins were lower due to a higher mix of revenue from legacy projects and the timing of new order intake. Two factors contributed to this. First, our top priority remains execution, with dedicated resources focused on completing the remaining legacy projects.

Especially the continued Rising biologics, which is feeling strong demand for our products.

The spending capacity in Latin and features is a direct response to market demand. And our new facilities are already contributing to near-term growth as we scale volumes and generate revenue from high value products in the second quarter. High value Solutions accounted for 42% of total revenue.

the even primarily by growth in high value syringes and to a lesser extent, easy feel cartridges and easy field buyers

Franco Stevanato: Second, several new orders that were forecast in Q2 are now expected to be secured in the second half of 2025. However, we are making meaningful operational progress on the initiative outlined in our business optimization plan. During the quarter, we completed the majority of these legacy projects and remain on track to finalize the remaining ones by the end of this year. One of the key performance indicators underscoring our operational improvements is customer site assessment tests, or SATs. This is the final validation step when a customer assesses the manufacturing line. For the first half of 2025, our SATs significantly increased compared to last year. This is an important achievement for the team and confirms that our actions are delivering results. Over the last 12 months, we have streamlined processes and improved workflows across every phase, from order intake to assessment testing.

Contributed to this first, our top priority remains execution with dedicated resources, focus on completing the remaining Legacy projects.

Second several new orders that were forecasting. The second quarter are now expected to be secured in the second half of 2025.

However, we are making meaningful, operational progress of the initiative outline, our business optimization plan,

During the quarter, we completed the majority of these Legacy projects and remain on track to finalize the remaining ones by the end of this year.

1 of the key performance indicators. Underscoring, our operational improvements is customer site. A certain tests or SATs. This is the final validation step. When a customer, accepts the manufacturing line,

For the first half of 2025, our SATs significantly increase compared to last year, this is an important achievement for the team and confirms that our action are delivered in results.

Franco Stevanato: We have also rebalanced internal resources to support the relocation of certain activities to Italy. Looking ahead, our Denmark operations will serve as an innovation hub focused on more customized manufacturing lines for device assembly and packaging. In parallel, we are advancing our footprint optimization efforts. We are evaluating a second location in Bologna, Italy, where we already have operations and access to a strong pool of technical talent. Over the past year, we have been laser-focused on execution. Now, we have initiatives underway to enhance our commercial strategy and better position the segment to capitalize on long-term growth opportunities. Over the next five years, we see continued strong demand due to the favorable trends such as the increase in the self-administration of medicine and the continued rise in biologics. We also believe that we are well positioned to benefit from the increase in capital investments and U.S.

Over the last 12 months, we have a streamline processes and improved workflows across every phase from order intake, to accept and testing, we have also rebalance internal resources to support the relocation of certain activities to Italy looking ahead. Our danmark corporations will serve as an Innovation Hub, focus on more customized manufacturing lines for the device assembly and packaging. In parallel, we are advancing our footprint. Optimization efforts.

We are evaluating a second location in Bologna, Italy, where we already have operations and access to a strong pool of technical talent.

Over the past year, we have been lesser focused on execution. Now we have initiatives under way to enhance our commercial strategy and better position the segment to capitalize on long-term growth opportunities.

Franco Stevanato: onshore initiatives that were recently announced by several pharma and biotech customers. Let's turn to an update on our capital investment projects in Fisher and Latina, where we are increasing our capacity for high-value syringes in the near term. In Fisher, line installation and customer validation are ongoing, and the site is expected to reach full productivity in late 2028. In June, we hosted participants from the Parenteral Drug Association, or PDA conference, for a tour of Stevanato Group's advanced manufacturing capabilities. The event showcased our premium drug containment solutions, integrated device manufacturing, and engineering after-sales services. It was a valuable opportunity to strengthen our relationships and demonstrate our commitment to innovation and quality. In Latina, the team remains focused on scaling the current phase of commercial production for high-value syringes. In parallel, we are installing additional syringe lines, including ones that produce dual-chamber products.

Over the next 5 years, we see continued strong demand, due to the favorable Trends, such as the increase in the self administration of medicine and the continued Rising biologics. We also believe that we are, well, positioned to benefit from the increase in capital Investments and US ensuring initiatives that were recently announced by several farmer and buy the customers. Let's turn to an update on our capital investment projects in Fisher and Latina where we are. Increasing our capacity for high value syringes in the near term.

In Fishers line, installation and customer validation are ongoing. And the site is expected to reach a full productivity. In late 2028. In June, we hosted participants from the parental Drug Association or PDI conference for a tourist Toronto group's Advanced manufacturing capabilities.

Franco Stevanato: Customer validations will continue into 2026 as planned. We are also preparing for the next phase of ready-to-use cartridge production. Our capital investments are helping us meet rising market demand for our core drug containment products amid the growth in biologics. In the first half of 2025, biologics represented 39% of BDS revenue, compared with 35% and 25% in the same periods in fiscal 2024 and 2023, respectively. While GLP-1s remain a strong long-term tailwind, the wider biologics segment is also a key growth driver for our broader high-value solutions portfolio. Let me share some examples. First, we are seeing high demand for our ALBA technology, the highest-performance syringe platform in our portfolio. Customers in the U.S., Europe, and APAC are using our ALBA platform for a range of MARS-based products that require minimal particle release. These programs include ophthalmic applications, among others.

The event showcase our premium drug containment Solutions integrated device manufacturing and Engineering after sales Services. It was a valuable opportunity to strengthen a relationships and demonstrate our commitment to Innovation and Quality. Inn Latina the team remains focused on scaling, the current phase of commercial production for high value Strangers. In Parallel, we're installing additional syringe lines, including ones that produce dual chamber products. Customer validation will continue into 2026 as plan. We are also preparing for the next phase, ready to use cartridges production. Our Capital Investments are helping us meet the rising market demand for our core drug containment products amid the growth in biologics in the first half of 2025, biologics represented, 39% of BDS Revenue compared with 35% and 25% in the same periods in fiscal 2024 and 2023 respectively.

Why JP wants remain a strong long-term Tailwind The Wider biologic. Segment is also a key growth driver for our broader high value Solutions portfolio.

Let me share some examples. First, we have seen high demand for our Albert technology, the highest performing syringe platform in our portfolio. Customers in the US. Europe and APAC are used in our Alba platform. For a range of maps based products that require minimal. Particle release.

Franco Stevanato: Second, we have a robust pipeline of MARS projects in the clinical phase for both novel applications and biosimilars, driving demand for our Nexa premium syringes. Lastly, we see an increasing number of requests for specially coated vials that are suited for highly potent drugs. This includes antibody drug conjugates, or ADCs, that require more complex production processes and advanced technologies. We believe that the strength of our portfolio will put us in an optimal position to leverage the diverse set of opportunities ahead, particularly in biologics, to deliver long-term sustainable growth. With that, I'll turn the call over to Marco.

This programs include autonomic application among others.

With that, I'll turn the call over to Marco.

Marco Lago: Thanks, Franco. Before I begin, I would like to clarify that all comparisons refer to the second quarter of 2024, unless otherwise specified. Let us start on page 9. In the second quarter of 2025, revenue increased by 8% to $280 million, driven by 10% growth in the BDS segment, which offset the 2% decline in the engineering segment. Foreign currency translation was a headwind, and on a cost and currency basis, revenue would have increased 10%. Revenue from high-value solutions grew 13% in the second quarter to $116.8 million, representing 42% of total revenue. This was primarily driven by continued strong demand for high-value syringes, as well as growth in both EZ-fill vials and cartridges. The strong performance in the BDS segment led to a 210 basis point increase in consolidated gross profit margin, reaching 28.1% in the second quarter of 2025.

Thanks Franco. Before I begin, I'd like to clarify that all comparisons refer to the second quarter of 2024 unless otherwise specified.

Let's start on page 9.

In the second quarter of 2025 Revenue increased by 8% to 280 million.

Driven by 10% growth in the BDS segment, which was set to 2% decline in the engineering segment.

For in currency translation was a headwind.

and on a constant currency basis, Revenue would have increased 10%

Revenue from high value Solutions grew 13% in the second quarter to 116.8% in 42% of total revenue.

This was primarily driven by continuous strong demand for high-value services as well as growth in both, easy field buyers and cartridges.

the strong performance in the BDS segment led to a 210 basis point increase in Consolidated, gross profit margin

Marco Lago: This was mainly due to the expected financial improvements at our Latina and Fisher's facilities as we scale our multi-year investment plan. While both sides are currently margin dilutive, we will continue to gain operating leverage as volumes and revenue grow and a higher mix or more accretive high-value solutions. These favorable trends were partially offset by lower gross profit contribution from the engineering segment. In the second quarter of 2025, operating profit margin increased to 14.8%, and on an adjusted basis, operating profit margin rose to 15.5%. This improvement was driven by an increase in gross profit and continued benefits from the cost management initiatives launched last year. Net profit totaled $29.7 million, with diluted earning per share of $0.11. On an adjusted basis, net profit was $31.3 million, and adjusted diluted EPS were also $0.11.

Reaching 28.1% in the second quarter of 2025.

This was mainly due to the expected Financial improvements at our Latin and Fishes facilities. As we scale, our multi-year investment plan,

While both sides are currently marching dilutive, we will continue to gain operating leverage as volumes and revenue growth.

And the higher mix or more accretive high value Solutions.

This fever will Trends where partially offset by lower gross profit contribution from the engineering segment.

In the second quarter of 2025, operating profit margin increased to 14.8% and on an adjusted basis. Operating profit margin Rose to 15.5%

this Improvement was driven by an increase in gross profit and continued benefits from the cost management initiatives launched last year.

net profit, total 29.7 million, we diluted earning per share of 11 cents,

Marco Lago: Adjusted EBITDA increased to $65.1 million, resulting in a 240 basis point improvement in the adjusted EBITDA margin of 23.2% for the second quarter of 2025. Moving to segment results on page 10, in the second quarter of 2025, revenue from the BDS segment grew 10% to $243.5 million, led by growth in high-value solutions, as well as other containment and delivery solutions. On a cost and currency basis, segment revenue would have increased 12%. As Franco noted, we are seeing vial demand stabilize as the effects of the stocking continue to ease. High-value solutions grew 13% to $116.8 million, representing approximately 48% of segment revenue, fueled by growth in high-value syringes and, to a lesser extent, EZ-fill cartridges and EZ-fill vials. Revenue from other containment and delivery solutions increased 6% to $126.7 million, driven by bulk syringes, cartridges, and contract manufacturing activities.

On an adjusted basis. Net profit was 31.3 million and adjusted diluted DPS were also 11 cents.

Adjust the debit, the increase to 65.1, Million result in a 240 basis. Point Improvement in the adjusted, beta margin of 23.2% for the second quarter of 2025 moving to segment results on page 10 in the second quarter of 2025 revenue from the BDS segment grew 10% to 243.5 million.

Led by growth in I value Solutions as well as other containment and Delivery Solutions.

on a constant currency basis, segment, Revenue will have increased 12%

As Franco noted, we are seeing vile demand stabilize as the effects of this stocking continue to ease.

High value Solutions, grew 13% to 116.8 million, representing approximately 48% of segment, Revenue, fueled by growth in high value syringes. And to a lesser extent is a field cartridges and DC field vs.

Marco Lago: In the second quarter of 2025, gross profit margin increased 350 basis points to 31.2%. Margin expansion was driven by the financial improvements in Latina and Fisher, as well as a higher mix of more accretive high-value solutions. As a result, the operating profit margin for the BDS segment rose to 19.1%, up from 14.5% in the same period last year. In the second quarter of 2025, revenue from the engineering segment decreased 2% to $36.5 million. This was driven by lower revenue in our glass conversion business, partially offset by growth in the device assembly and packaging business. The segment's gross profit margin declined to 6.6%, resulting from a higher level of revenue from legacy projects and the timing of new work.

Revenue from other containment and Delivery Solutions, increase 6% to 126.7 million driven by buy syringes cartridges and contract manufacturing activities.

In the second quarter of 2025 gross profit margin increased 350 basis points to 31.2%.

Margin expansion was driven by the financial improvements in Latin and fissures, as well as in higher mix of more accurate by value Solutions.

As a result, the operating profit margin for the BDS segment. Rose to 19.1%.

Up from 14.5% in the same period last year.

In the second quarter of 2025 revenue from the engineering segment decreased 2% to 36.5 million.

This was driven by lower Revenue in our glass conversion business.

Marco Lago: This was due to a shift in new orders that were initially forecasted for the second quarter and are now expected to be secured in the second half of 2025. As a result, the operating profit margin was negative 0.8%. Please turn to the next slide for an overview of the balance sheet and cash flow. As of June 30, 2025, the company had cash and cash equivalents of $94.2 million and a net debt of $312.4 million. In July, we announced $200 million in financing from three of our banking partners. The funds will support the expansion of syringe production and future capacity for ready-to-use cartridges at our Latina facility, as well as syringe production and device contract manufacturing in Fisher. For the second quarter of 2025, capital expenditures totaled $69.1 million. Net cash from operating activities increased to $44.9 million.

New orders that were initially forecasted for the second quarter and are now expected to be secured in the second half of 2025.

As a result, the operating profit margin was negative 0.8%.

Please turn to the next slide for an overview of the balance sheet and cash flow.

As of June 30, 2025 the company at cash and cash, equivalents of 94.2 million and net that of 312.4 million. In July, we announced 200 million financing from 3 of our banking partners.

The funds will support the expansion of syringe production and future capacity for ready to use cartridges at our Latina facility.

As well as series production and device contract Manufacturing in fissures for the second quarter of 2025 Capital expenditures. Total 69.1 million.

Marco Lago: Cash used for the purchase of property, plant and equipment, and intangible assets totaled $60.3 million for the second quarter of 2025. The combination of increased operating cash flow and lower CapEx drove a significant year-over-year improvement in free cash flow. This resulted in a negative free cash flow of $13 million for the second quarter of 2025, compared with negative $46.1 million in the same period last year. We believe we have adequate liquidity to fund our strategic priorities through a combination of cash on hand, cash generated from operations, available credit lines, and our ability to assess additional debt or equity financing. Please turn to the next slide for guidance. We are reiterating our fiscal 2025 guidance and still expect revenue in the range of $1,160,000,000 to $1,190,000,000, adjusted EBITDA between $288.5 million and $301.8 million, and adjusted diluted EPS between $0.50 and $0.54.

Net cash from operating activities, increase to 44.9 million.

Cashews for the purchase of property, plant and equipment and intangible assets. Total 60.3 million for the second quarter of 2025.

The combination of increased operating cash flow and lower capex draw to a significant year-over-year Improvement in free cash flow. This resulted in a negative free cash flow of 13 million for the second quarter of 2025 compared with negative 46.1 million in the same period last year. We believe we have adequate liquidity to found our strategic priorities, through a combination of cash on hand cash, generated from operations available credit lines, and our ability to access additional debt or Equity financing.

Please turn to the next slide for guidance.

We are reiterating our fiscal 2025 guidance and still expect Revenue in the range of 1 billion, 60 million to 1 billion, 190 million adjusted the bit between 288.5 million and 301.8 million.

Marco Lago: We have updated certain inputs in our guidance, including the following: the BDS segment is now expected to grow high single digits, and the engineering segment is now expected to decrease by low double digits compared to fiscal 2024. An increase in the mix of high-value solutions to 40% to 42% of total revenue, up from 39% to 41% in our prior guide. For foreign currency, we now assume a headwind of approximately $12 million to $15 million on the top line. We assume a new dollar rate between 1.13 to 1.17 for the second half of 2025. The headwind is offset by growth and fully absorbed in the model. In addition, our hedging strategies have helped to limit our exposure. An updated tariff rate for imported goods from the European Union to the U.S. of 15% compared with our prior assumption of 10%.

And adjust the diluted DPS between 50 and 54 cents.

We have updated certain inputs in our guidance, including the following.

the BDS segment is now expected to grow High, single digits, and the engineering segment is now expected to decrease by low double digits, compared to fiscal 2024,

an increase in the mix of high value, solutions, to 40 to, 42 of total revenue up from 39 to 41%, in our prior guide for foreign currency. We now assume a headwind of approximately 12 to 15 million on the top line.

We assume a euro dollar rate between 1.13 to 1.7 for the second half of 2025.

The headwind is offset by growth.

A fully absorbed in the model.

In addition, our aging strategies have helped to limit our exposure

Marco Lago: Our guidance fully absorbs the incremental impact from the new tariff rate. Our updated guidance also considers an operating profit margin expansion of approximately 150 basis points compared to fiscal 2024, driven by lower than expected depreciation as we refined our estimates at the end of June and an increase in high-value solutions. The better operating profit is offset on the bottom line by a higher tax rate of 25.8%. Thank you. I will hand the call back to Franco.

and updated tariff rate for imported goods, from the European Union to the US of 15% compared with our prior, Assumption of 10%.

Our guidance fully absorbs, the incremental impact from the new tariff rate.

Our update guidance also considers an operating profit. Margin expansion of a approximately 150 basis points compared to fiscal 2024 driven by lower than expected depreciation as we refine our estimates at the end of June and then increase in high value Solutions the best

better operating profit is a set on the bottom line by higher tax rate of 25.8%

Thank you. I will end the call back to Franco.

Franco Stevanato: Thank you, Marco. With the first half of the year behind us, we are seeing sustained momentum driven by healthy market demand, which puts us squarely on the path to achieve our full year guidance. As we advance our multi-year investment optimization plans, we remain focused on disciplined execution, industry-leading innovation, and continue to meet the evolving needs of our customers. Together, these priorities position us well for long-term profitable growth. We operate in dynamic, high-growth markets with capital investments strategically aligned to meet demand-driven needs. We have an established presence and a long track record with the major biotech and pharma players, including the top 25 global pharma customers. These customers have a rich pipeline of injectable biologics in development, and we remain a trusted partner to support their effort in bringing new groundbreaking treatments to patients.

Thank you Marco. With the first half of the Year behind has we are seeing sustained momentum driven by healthy market demand which puts us squarely on the path to achieve our full year guidance.

As we advance our multi-year investment optimization plans, we remain focused on disciplinary execution, industry-leading Innovation and continue to meet the evolving needs of our customers together. This priorities position as well for long-term profitable growth.

Franco Stevanato: This dovetails with powerful secular trends, such as the aging population, pharmaceutical innovation, and the shift towards self-administration therapies. These trends align closely with our core capabilities and position us well for long-term success. Looking ahead, we believe the need for high-performance drug containment, coupled with the value of a fully integrated platform, will support sustainable revenue growth and drive meaningful margin expansion. Backed by strong business fundamentals and a disciplined financial strategy, we have the flexibility to invest in growth while creating a long-term value for our shareholders. Operator, we are ready for questions. Thank you.

Pharma players, including the top, 25 Global Pharma customers. These customers have a rich pipeline of biologic injectables in development and we remain a trust Department to support their effort. In bringing new groundbreaking treatments to patients

These do taste with powerful secular Trends such as aging population. Pharmaceutical Innovation, and the shift towards self Administration therapies this Trends, align closely with our core capabilities and position as well for long-term. Success, looking ahead. We believe the need for high performance track containment coupled with the value of a full integrated platform. We support a sustainable Revenue growth and drive, meaningful margin expansion.

Conference Operator: Thank you, sir. This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. We kindly ask you to limit to one question and follow up only and join the queue again for any further questions. We will pause momentarily for the first question. The first question comes from Matt Larew of William Blair.

Backed by strong business fundamentals and a discipline Financial strategy. We have the flexibility to invest in growth while creating a long-term value for our shareholders operator. We are ready for question. Thank you.

Thank you, sir. This is the course call conference operator. We will now begin the question and answer session.

anyone who wishes to ask a question, may press star and 1 on the Touchstone telephone

To remove yourself from the question queue. Please press star and 2.

Please pick up the receiver when asking questions. We kindly ask you to limit to 1 question and follow up only and join the queue again for any further questions.

Little pause momentarily. For the first question.

The first question comes from Matt laru of William Blair.

Matt Larew: Hi, good morning, and thanks for taking my question. On engineering, it sounds like you are getting close to wrapping up some of the legacy projects that were hindering your ability to take on new work. Now you referenced some delays in new orders coming in. Just curious, are those delays in any way related to customer decision-making related to tariffs? Are they purely timing, or is this sort of an extended sales cycle issue? That is part one. The second part would be, I think the new guidance requires a high teens decline in the back half of the year for engineering. Franco Stevanato, you obviously alluded to a number of strong tailwinds in the medium term vis-à-vis reshoring and investments in the U.S.

Matt Larew: To the extent we do have a high teens decline in engineering in the back half of the year, when does that reverse, and how do we kind of bridge to the strong growth environment you alluded to?

Hi. Good morning and thanks for taking my question on engineering. It sounds like you're getting close to wrapping up some of the Legacy projects that were hindering your ability to take on new work. But now you referenced some delays in new orders coming in. So just curious if you are those delays in any way related to customer decision-making related to tariffs are they purely timing or is this sort of an extended sales cycle issue as part 1? And then the second part would be I think this the new guidance requires a high teams decline in the back half of the year for engineering. But frankly you obviously alluded to a number of strong Tailwinds in the medium-term uh, Visa V reshoring and investments in the US. So it's the extent. We do have a high teens decline in Engineering in the back half of the year. When does that reverse? And how do we kind of Bridge to the strong growth environment? You alluded to

Marco Lago: Thanks, Matt. That's Marco speaking. Starting from Q2, the difference is related to timing of new orders. That's basically from Q2 to the second half of the year. We haven't lost important negotiations. It's just a matter of decision-making related to CapEx on our customer side. This is a project-based business, so it's not unusual for order flow and timing to fluctuate from quarter to quarter. About the guidance reflecting this timing, let's say postponement, we review our guidance, guiding now to a low double-digit decline compared to last year that is reflecting the timing difference of new orders. Nevertheless, as mentioned, we more than offset the difference with a stronger market in BDS segment that offset also the currency headwinds.

Thanks, Mark, Marcus.

Second quarter. The the difference is related to timing of new orders. So um

That sleep basically from the second quarter to the second half of the year. We haven't lost important. Negotiation is just a matter of decision making related to capex on our customers side. You know, this is a Project based business, so it's not unusual for order flow and time into fluctuate from quarter to quarter.

And about the guidance reflecting this timing. Let's say postponement. We review our guidance, guiding now to...

Low double digit decline compared to last year. That is reflecting the time in difference of a new orders. Uh

nevertheless as mentioned we more than offset. The the difference with the stronger Market in uh BDS segmented of set. Also the currency I

Franco Stevanato: Matt, Franco speaking. If I can add a little bit more color from what is related to the market, the biologic market is heavily invested in new technology thanks to the rich pipeline that they have, they are launching into the market. I can confirm that demand outside is very strong. The focus in the last three quarters for Stevanato was just to deliver and to succeed with the SATs to our big clients, in particular for what are related to some legacy programs. Today, we were successfully able to deliver this line, and these are inside of bigger agreements with our customers that will be some additional repetitive orders. It is just a timing effect. Today, once we are going to deliver this line, there will be additional lines that we are going to assemble and deliver to our clients in the next 12 to 18 months.

M, Franco speaking. If I can add a little bit more color from what is related to the market. Biologic Market is heavily invested in new technology. Thanks to the rich pipeline that they have at their lunch into the market so I can confirm that. The demand outside is very strong. The focus in the last 3 quarters for Stan was just to deliver and to succeed with the SATs to our big clients in particular for what are related to some Legacy program today we are, we were successfully were able to do

Deliver this line and these are inside of bigger agreement with our customer, that will be some additional repetitive orders. So, just a timing effect. Today, once we are going to deliver this line, there will be additional lines that you're going to assemble it and deliver to our clients in the next 12 to 18 months.

Matt Larew: Okay. Thank you. Just as a follow-up, on the Q1 call, you referenced, I think, an improvement in vials and talked about mid to high single-digit growth for vials for the year with sequential improvements throughout the year. It sounds like qualitatively your comments support that, but just wanted to confirm that you did continue to see quantitative improvement on the vial side and that that guidance is intact for the year.

Okay, thank you. Um, and just a follow-up on the the first quarter call you'd, uh, reference, uh, I think, you know, an improvement in in files and and talked about

Uh, mid to high single digit growth for vials for the year with sequential improvements throughout the year. Uh, it sounds like qualitatively your comment support that but just wanted to confirm that you did continue to see a quantitative Improvement on the Bayou side and that that guidance is intact for the year.

Marco Lago: Yes. I start with the numbers, then Franco Stevanato will provide more color about the market. We went up about 3% compared with the same period last year in vials, but the orders in stake are very, very strong. I mean, it's double-digit growth compared to the same period last year. So we reiterate our confidence in mid to high single-digit growth in vials for 2025, you know, after a decline of 35% last year.

Yes, I start with the numbers, then Franco will provide more color about the market. Uh, we went up about 3%, compared with the same period last year in BIOS, but the order in stake is very, very strong. I mean, is double digit. Grow compared to same period last year. So we reiterate our confidence in mid to high single digit growth in buyers for 2025, you know, after a decline of 35% last year

Franco Stevanato: Matt, if you remember, in the last two, three quarters, we showed that we are starting to see gradual recovery, gradual improvement in the vial market, in particular on bulk, and also in the EZ-fill. Today, we have some good indicators in Stevanato Group S.p.A. Our order intake is starting to improve quarter after quarter. We are starting to see also some positive big orders, in particular in the United States, in terms of EZ-fill vials. Also, we are confident that our idea that without 2025, that we move without a sort of normalization is still on track. We are confident of this gradual recovery on the vial market.

And M, if you remember in the last 2, 3 quarters, we share that we are starting to see gradual recovery, gradual, improving the buyer Market in particular on bulk. It also is an easy field. So, today we have some good indicators that the group. So, our order intake is that is order book is starting to improve quarter after quarters. We have started to see, also, some positive big orders in particular in United States, for in of easy field buyers. And also we are confident that our, um, our idea that without the 2025, that we move without a sort of normalization is still on track. So we are confident on this. Gradual recovery on the buyer Market.

Matt Larew: Great. Thank you.

Great. Thank you.

Franco Stevanato: You're welcome.

Conference Operator: The next question is from Michael Ryskin of Bank of America.

You're welcome.

The next question.

From Michael Riskin of Bank of America.

Michael Ryskin: Hey, this is Dr. Gron from Mike. Thanks for taking my question. I just wanted to ask on BDS. The guide reads as encouraging, but wanted to see if you were seeing any pull forward from customers due to tariffs.

Confirm my thanks for taking my question. Um, I just wanted to ask on BDS the guide reads and encouraging but wanted to see if you were seeing any pull forward from customers, you too tariffs.

Marco Lago: Franco speaking. What we see overall is that the forecast of our big clients, also biosimilars, are regular. We do not see big fluctuation quarter by quarter. We see that, in particular, for what is related to our EZ-fill vials product, syringes, cartridges, and vials, there are gradual and constant forecasts. About tariffs, we had positive conversations with our customers. Basically, we are reiterating our guidance. In May, we assume in our guidance about 4.5 million CIMPAT at the operating profit level. In spite of the increased tariffs from the European Union to the U.S., we have been able to offset these incremental tariffs thanks to conversations with our customers and the fact that we are leveraging more and more our global footprint.

I uh, Franco speaking, what we see all overall that the fora the our big clients also biosimilar are regular, we don't see big fluctuation quarter by quarter. So we see that the in particular for what is related to our easy field product of syringes cartridges and Via that are gradual and and constant and forecast.

Lisa Miles: One other point that I might add is that we are not seeing the phenomenon of full pull forward as it relates to the tariff situation, as others may have seen.

Yeah, about tariffs. Uh, we had the positive conversation with our customers. Uh, basically, we are a reiterating, our guidance in may we assuming, in our guidance about 4.5 million C, but at the operating profit level, in spite of the increase, the tarus from the European Union to us, we have been able to to offset this incremental tariffs. Thanks to conversation with our customers and the fact that we are leveraging more and more, our Global footprint,

And one other point that I might add is that we are not seeing the phenomenon of full pull forward as it relates to the tariff situation. Um, as others may have seen,

Michael Ryskin: All right. Great. Thank you so much. If I may ask, a few weeks ago, you announced a $200 million bridge credit for your Fisher and Latina side. Are you able to give us a little bit more color on that agreement and what you're looking to use those funds for?

All right. Great, thank you so much. And then, if I may ask like, a few weeks ago, you and I say $200 million Bridge. Um, credit with, uh, for, um,

For you, for sure. That and Latina sites. Are you able to give us a little bit more color on that agreement? And, you know, what you're looking to use those funds for?

Marco Lago: Yes. First of all, we have a very good relationship with our banking partners. The purpose of the financing is to expand our capacity, predominantly in Latina with RTU cartridges and syringes, but also in Fisher's with syringes, vials, and drug delivery systems. It is totally consistent with our strategy of expansion. Besides that, we are also planning to reimburse some financing in 2025 and 2026, some legacy financing. So we are just securing in advance the needs for the future months and years.

Yes, first of all, we are very good relationship with our banking Partners. Uh, the purpose of the financing is uh to expand our capacity predominantly in Latina with the rtu cartridges and series but also in features with the syringes via and Drug Delivery Systems,

Um, it's a totally consistent with our strategy of expansion and beside that. We are also planning to reimburse some financing in 25 and 26, some Legacy financing. So it's a, we are just a security in advance, the the need, for the future months and years.

Michael Ryskin: All right. Great. Thank you so much.

All right. Great, thank you so much.

Conference Operator: The next question is from David Windley of Jefferies.

The next question is from David windley of Jeffries.

Matt Larew: Hi. Thanks. Thanks for taking my question. You mentioned in your prepared remarks, I made the point about the breadth of demand, highlighting GLP-1s, but other biologics. I wondered if you could delve into that a little bit more, maybe tell us what percentage of your revenue or what growth contribution the GLP-1 class is making and where that is showing up in your product suite. I'm sure it's in cartridges and syringes, but also wondering about maybe some of your contract manufacturing activities as well. Thanks.

Marco Lago: Yes. David, Franco speaking. First of all, we don't provide a detailed breakdown around the GLP-1s. Usually, we don't provide a number around a single category. GLP-1s, we put under the umbrella of biologics in our BDS segment that move from 2022 to 2025 from 19% of the revenue of the BDS segment up to more than 39% in the first semester of 2025. For sure, GLP-1s is a solid long-term tailwind for Stevanato Group because we are deeply involved through our big clients, also biosimilars, through all practically our product portfolio from syringes, syringe bypass, cartridges, ready-to-use vials, engineering line, and also from CMO in terms of BDS. Beside this, what I would like to underline is that the biologic industry in general, in particular our top 25 clients, have a rich pipeline today.

Also wondering about, you know, maybe some of your contract manufacturing activities as well. Thanks. Yes.

David the Franco speaking. So first of all we don't provide a detailed breakdown around the jp1 so we usually we don't provide the number around a single uh category jp1. We put under the umbrella of biologics in our BDS segment that move from 2022 to 2025, from 19% of the revenue of the BDS segment, at up to more than 39% in the first semester of 2025. So for sure JP was is a, it is it will be a solid long-term Tailwinds for Stan group because we are deeply involved through our big clients. Also biosimilar through all practical product portfolio from syringes syringes by Parts cartridges, you say to fill engineering line and also from CMO internal DDS, but beside this. What I would like to underline that the biologic industry in general, in particular about top 25 clients.

Marco Lago: Most of this pipeline, they are going to use injectable products, even more what we call self-administration. Today, in Stevanato, we have many programs around assembly technology for what is related to certain high-potent drugs that from certain molecules that are very high attention on the particle release. We have many programs around cartridges, ready-to-use vials from 3 to 5 to 10 mL when they're connected also to auto-injectors. Also, we have many programs around EZ-fill vials. Overall, we are able to continue to grow together with our big bio customers that involved Stevanato Group many years ago on standard vial. Today, they are continuing to evolve, and thanks to their self-administration requirements, they are going to engage Stevanato in the full portfolio. We are quite happy about this.

Have a rich pipeline today and most of these pipeline, they are going to use injectable product even more what we call self-administration. So today in stevanato, we have many programs around Albert technology for what is related, to certain hypoten drugs that from certain molecule that are very high attention on the particle release. We

There are many program around Carter, registry to field, from 3 to 5 to 10 mL, when there is it's connected. Also dealt injectors. Also, we have many program around the buyer ready to pee. So all overall, we are able to continue to grow together with our big Bayou customers. That involve 7 group many years ago on standard via today. They are continuous travel and thanks to their social Administration. Requirement, they're going to engage 7 out in the pool for you. So we are quite happy about this.

Matt Larew: That's helpful. Thank you. I'm wondering, as a follow-up, could you talk about maybe your mix within the high-value and how that is evolving? I guess what I'm getting at is how much of the margin improvement that you're seeing is a richer mix in terms of the product demand of your high-value solutions, and how much of it is simply recovering some utilization in some of the lines where activity has been depressed? How much of it is just absorption versus mix? Thanks.

Was helpful. Thank you. Um, I'm wondering as a follow-up. Could you talk about

Um, maybe your mix within high value.

Uh, and how that is evolving. I I guess what I'm getting that is

How much of the margin improvements that you're seeing?

Is is richer mix in terms of the product, demand of your high-value Solutions, and how much of it is simply recovering some utilization in, uh, in some of the depress, the lines where activity has been depressed. How much of it is just absorption versus mixed? Thanks

Marco Lago: Thanks for the question, David. Marco speaking. First of all, we are happy about the first half of the year. In the second quarter, we reached 42% on total revenues in high-value solutions. The main driver in the first half of the year has been high-performance syringes, particularly Nexa. Nevertheless, we see improvements in EZ-fill vials, as mentioned in the commentary, in EZ-fill cartridges, and also, we can see very good opportunities in ALBA. So it's both a growth of volumes, but also, we are happy about the mix.

Thanks for the question name, Mark, go speaking. First of all, we are happy about the first half of the year in the second quarter. We reach 42% on total revenues in a value Solutions. Uh,

Main driver in the first half of the year has been high performance syringes particularly next.

Nevertheless, we see improvements in Ezekiel buyers as mentioned, the commentary in is the cartridges and also we can see very good opportunities in Alba. So if both the growth of

Volumes. But also we are happy about the mix.

Matt Larew: Got it. Thank you.

Yeah, thank you.

Conference Operator: The next question is from Patrick Donnelly of Citi.

Next question is from Patrick Donley of City.

Matt Larew: Hey, guys. Thank you for taking the questions. So maybe one on the tariff side. It sounds like you guys are absorbing the new rates entirely in the guide. Can you just talk through the levers? Is that primarily pricing? Are you shifting more capacity to Fisher's? I guess on that point, where are we with Fisher's in terms of the capacity and how you're feeling there?

Hey guys, thank you for taking the questions. Um, so maybe on the tariff side, you know, it sounds like you guys are absorbing the new rates entirely in the guide. Can you just talk through the levers? Is that primarily pricing? Are you shifting more capacity to Fishers? And I guess on that point, you know, where are we with Fishers in terms of the capacity and how you're feeling there?

Marco Lago: We have different factors helping us to absorb the incremental 5%. We had positive conversations with customers that most of the time help us in changing the inco terms. So it is not impacting our cost, and the customer is taking care of the custom duties. Sometimes, we had the opportunity to increase the price after absorbing the cost. In this case, we are guiding a tailwind of about 2.5 million in our guidance that are a little bit diluted, but it is increasing our top line. Finally, probably most important, we are leveraging our global footprint, trying to optimize the logistics in agreement with our customers.

We have different factors helping us to absorb the incremental 5%. We had positive conversations with customers that most of the time help in passing changes in the Incoterms. So it's not impacting our cost, and the customer is taking care of it.

The.

Custom duties. Uh, sometimes we had the opportunity to increase the price after absorbing the the cost. And in this case we had the we are guiding and Tailwind of about 2.5 million in our guidance that are a little bit dilutive at this increasing our Top Line.

Franco Stevanato: Yes. Patrick, Franco speaking. On top of what Marco already shared with you, we are proactively mitigating the tariffs through rescheduling our 13 plants' production to our big clients and to pass some surcharge to our customers. What I can add is that the Fisher plant in the short term is focused on the audit and validation with the existing program that we have with our big U.S. clients. We cannot have a particular benefit in 2025 from the Fisher plant because they have already a big program to ramp up capacity with already existing agreements with our customers. It is also true that in the medium term, we continue to benefit a lot with this greenfield plant, both for what are related to our EZ-fill vials products and also our device program.

Yes, Patrick Franco. Speaking on the top of what Marco already shared with you that we are practically. Mitigate the started through uh rescheduling through our 13 plans, production to our big clients, and to pass some sort of charge to our customer. What I can add that the Fisher plans in the short term, is the focus on do audit a validation with existing program, that we have a big us clients. We cannot have particular benefits in 2025, from the future plans because I have already a big program to ramp up capacity with already existing agreement with our customers.

Franco Stevanato: Even more, we are starting to see more and more interest from our international clients to further increase the opportunity in these plants.

It's also true that in the medium term, we count to benefit a lot with this Greenfield Plant both for what are related, our easy, Phil products. Also, our device program, even more, we started to see more more interest from our International clients to further increase the opportunity in these plants.

Matt Larew: Okay. That's helpful. Then, Marco, maybe one for you, just in terms of the guidance. If you can just help us out on, I think, about Q3 or Q4, whether it's revenue, EBITDA, earnings, would be helpful just to talk through the second half split there. Thank you, guys.

Okay, that's helpful. Um, and then Marco maybe 1 for you, just in terms of, you know, the guidance, if you could just help us out on 3 or 4 q, you know, whether its Revenue ibitta earnings, uh, would be helpful just to talk through the second half split there. Thank you guys.

Marco Lago: Your voice was a little bit broken. Sorry, Patrick. I am not sure we got the full question.

Your voice was a little bit broken. Sorry, Patrick. I we're not sure we got the full question.

Matt Larew: Yeah. Just asking about the second half split between Q3, Q4 on revenue and earnings. If you could help us out. Thank you.

Marco Lago: Yeah, sure. Basically, we provide color about segments. I think that is clear. We expect in Q3 a mid-single-digit growth compared with the same period last year and similarly in Q4 a mid-single-digit growth. We have seen the second half a mid-single digit to match our guidance both in Q3 and Q4. Is that clear compared with the same period last year? I mean.

Yeah, just asking about the second half. Split between 3 q 4 Q on revenue and earnings if you could help us out, thank you.

Yeah, sure.

Basically we we provide colors about segments, I think that is clear. We expecting the third quarter and mid single digit growth compared with the same period last year and the C Miller Link in Q4 and mid single.

Digit growth. So we we seen the second half and mid single digit to match our guidance both in Q3 and Q4

Is that clear compared with the same period last year? I mean,

Matt Larew: Yes. Thank you.

Yes, yeah. Thank you.

Conference Operator: The next question is from Larry Solo of CJS Securities.

The next question is from Laro Larry solo of CJs securities.

Matt Larew: Great. Good afternoon. Could I just follow up on the Fisher's and Latina question? Can you just give us a little more color? I know you mentioned they are clearly still margin dilutive, but I know Latina is profitable now. Can you just kind of give us an update on progress there? Has Fisher's, I assume, is profitable today? I know it is margin dilutive, but still profitable. Is that correct?

Great. Uh, good afternoon. Can you just following up on the on the fissures and Latina question? Could you just give us a little more call or just, I know you mentioned they're they're they're clearly still uh, margin dilutive but um I know Latina is profitable now. Can you just kind of give us an update on progress there? And as Fishers I assume it is profitable today. I know less its margin dilutive but still profitable. Is that correct?

Marco Lago: We started commercial production in Latina in Q4 2023 and three quarters after in Fisher's. Today, Latina is positive in terms of gross profit. Fisher's is not yet. We can see sequential improvement quarter after quarter. Overall, the margin of the two sides is still dilutive compared with the average of the company. This means that for the future, we have further opportunity to scale up. Since we are producing and selling high-value products there, we expect a margin improvement in the coming quarters. Correct. In fact, if I can add a little bit more color from the market, in Latina, we are continuing to scale up commercial production, in particular for what is related to syringes, Nexa syringes, and also bypass syringes.

We start the commercial production, Latina and Q4 23 and 3 quarters after in Fishers. So today Latina is a positive in term of a gross profit. Fisher is not yet.

Anyway, we can see sequential Improvement quarter after quarter.

Overall, the margin of the 2 sides. Still dilutive compared with the average of the company.

It means that.

Scale up and uh, since we are uh producing and selling high value products that are we expect the margin improvements in the coming quarters.

Marco Lago: We are also preparing the plants in order to build the capacity for EZ-fill vials, and the program is to launch at the end of 2026, beginning of 2027, this high-volume production for cartridges straight to fill. All these elements will help to boost the revenue in Stevanato Group S.p.A. for high-value products from these plants. In parallel, from the plant in Fisher, we are continuing the installation and validation of syringes technologies. In parallel, we are building a big department that will be able to host production from drug delivery systems for one big U.S. client. These two greenfield plants will be an active contributor to revenue marginality in the next years.

Correct. If at if I can add a little bit more color from the market in Latina, we are, we are continued to scaling up uh commercial production in particular for what is related to syringes necessary, ranges also bypass syringes also we are preparing the plants in order to build the capacity for easy free cartridges and the program is to launch at the end of 2026. Beginning 2027, this high volume production for cartridges rate to fill all these elements will help to boost the revenue in turn not to group of our high value product from these plants in parallel from the planting feature,

We have continued the installation and validation of syringes Technologies and on building a big department that will be able to host production from drug. Delivery system. For 1, big us client. So these 2 Greenfield plants that will be an actor, active contributor to revenue marginality in the next years.

Matt Larew: Gotcha. Great. If I could just switch gears to engineering real fast, it sounds like most of the stuff is just more growing pains and timing. As we look out, maybe not in early 2026, but as you look at maybe by 2027, 2028, would you expect margins to recover back and maybe be even higher than they were before you began these strategic initiatives in that segment?

Gotcha, great. And if I if I could just switch gears to engineering real fast, it sounds like most of the stuff is just more growing pains and timing. Um, as we look at

Began these strategic initiatives in that segment.

Marco Lago: We are very confident about that. We described the problem we face that we are now fixing with the delivery of the legacy projects, as Franco Stevanato was mentioning. Generally speaking, we expect to go back to the profitability we had in 2022 and 2023. The customers are still appreciating our technology and our ability to deliver customized projects. In fact, if I can add a little bit more color, in the last three quarters, we focused our organization through some optimization plan program, in particular from the plants that we have in Denmark that is specialized on the production for inspection machine assembly technology for sophisticated devices. Also in Italy, we are starting to review our footprint in order to make some center of excellence able to produce some inspection lines. Our old products are well absorbed by our biologic customers in the future.

Thanks.

We are very confident about that. We described the problem. We face that we are now fixing with the delivery of the Legacy projects as Franco was mentioning

Mhm. Uh,

Marco Lago: The combination of this increase of footprint productivity and the strong demand outside gives us good confidence that we can have a good growth on the engineering and also improving our margins.

J speaking with respect to go back to the profitability, we had in 202 and 23. So the customers are still appreciating our technology and our ability to deliver customized projects. Yes. In fact, if I can add a little bit more color in the last 3 quarters, the we focused our organization to through some optimization plan program. In particular from the plants that we have in Denmark, that is specialized on the production for in Special Machine assembly technology for sophisticated devices. We also in Italy, we have a starting to review our footprint. In order to make some Center of Excellence, able to produce some inspection line. So are all products that are well, uh, absorbed by our biological customer in the future. So the combination of this increase of a footprint productivity and the strong demand outside is give us good confidence that we can have a good growth on the engineering.

Also, improving our Matrix.

Matt Larew: Great. I appreciate that color. Thank you.

Great. Appreciate that. Caller, thank you.

Conference Operator: The next question is from Paul Knight of KeyBanc Capital Markets.

The next question is from Paul.

Of.

Matt Larew: Good morning. On the BDS segment, high-value solutions grew 13%. Other containment grew 6%. What would be a normal other containment growth rate, in your opinion? Should it be high single digits, or what should that 6% be after the stocking is over?

Uh good morning on the BDS segment, high value Solutions, grew 13% um, other containment grew 6%. What would be a normal other containment growth rate in your opinion? Should it be high single digits? Or

What should that 6% be after the stocking is over?

Marco Lago: Hi, Paul. Marco speaking. It's more the normalized, let's say, growth in other containment delivery solutions. It's more we've seen the low to mid-single digit as per our Capital Markets Day. You know, we expect after the recovery of the bulk vials a growth in that range. We are, as you know, more focused with our investments in high-value solutions. So this is where we are growing and see the growth for the coming years.

Hi, Paul Marcus. Speaking is more the normalized. Let's say, growing other. Containment delivery solution is more within the low to mid single digit as per our

uh,

Capital markets day. You know, we expect after the recovery of the bulk via a growth in that range. Uh, we are as you know, more focused with our investments in our value Solutions. So so this is where we are, uh,

Franco Stevanato: Yes. In fact, Paul, again, if I would like to give some color from my perspective of view. We serve the top 25 global key customers. Also, in parallel, we serve several hundred clients worldwide. But the goal in Stevanato in the medium-long term is to further focus Stevanato on high-value products. In fact, all the investments that we are doing are moving more and more in the high-value solutions. It's strategically important to keep a market on also bulk vials or other non-high-value products. But the big goal in the medium term for us is to invest and to focus on Stevanato in this direction of high-value products.

Growing and see the growth for the coming years. Yes.

In fact, Paul again, I would like to give some color from Market point of view, we serve the top 25, Global key customers. They also, in parallel, we serve several hundred clients worldwide.

But the goal in stevanato in the medium long term to further Focus, the banat on high value product. In fact, all the investment that we are doing are moving more and more in the high value solution. Strategically, important to keep a market on also bulk buyer, or other non high value product. But the big goal in the meantime for us is to invest to focalize 7 in this direction of high value product.

Matt Larew: The question I have on engineering is you slightly lower sales from glass converting. Does your own internal need for equipment detract from engineering growth, and how quickly can you add capacity in engineering?

then the question I have on engineering is

you uh slightly lower sales from glass. Uh converting does your own internal need for equipment um the track from engineering growth and

how quickly can you add capacity in engineering?

Marco Lago: In our comments, we focus on third-party revenue. As you know, Paul, engineering glass converting machines is an important piece of our integration, especially in Fisher's and Latina, also in ready-to-use cartridges. But when we comment revenue growth, it is only on third parties.

So in our comments, we focus on third, parties and Revenue.

As you know, the Paul engineering glass converting machine is an important piece of our integration, especially with features and Latina.

Matt Larew: Yes, sure. Where do you have you need to add capacity is what you are saying?

Also in ready to use cartridges. So it's but when we comment Revenue grow is only on third parties. Yes.

Sure.

And where do you have you need to add capacity is what you're saying?

Marco Lago: Exactly. We are going on in Latina and Fisher's where our technology is needed, both in bulk and in EZ-fill vials.

Franco Stevanato: Today, Paul, our engineering division, the glass forming third party is an important market, but it is more a niche. The engineering division is focused today to serve our big pharma biologic customers, in particular for what is related to inspection machines and sophisticated technology of assembly from auto-injectors, is where the market is growing. To remember, the power of the engineering division for Stevanato has two objectives. One is to serve the biologic market, but the second is to make the internal group of the BDS segment, in particular, competitive. Today, our engineering division is squarely focused to develop the technology for cartridges straight to fill, particular technology for bypass, and also the ALBA technologies, where we want really to build some competitive advantages. The BDS segment is where the engineering plays a critical role for the group internally.

To make the internal group. The BDS segment in particular competitive today our engineering division is squarely focused to develop the technology for Cartage user to field particular technology for bypass. Also the Ala Technologies where we want to really to build some competitive advantages that bdcs segment is where the engineering is play a critical role for the group internally.

Matt Larew: Okay. Thank you.

Okay, thank you.

Conference Operator: The next question is from Doug Schenkel of Wolfe Research.

The next question is from Doug. Shenko of Wolfe research.

Matt Larew: Hi. Thank you for taking my. Let me start with tariffs. I am just curious from a tariff mitigation standpoint. Have you been able to pass along price? What other mitigation efforts are underway, and how are those reflected in guidance?

Hi. Thank you for taking my, uh,

I, uh,

Let me, let me start with tariffs. So I'm just curious from a tariff mitigation standpoint. Have you been able to pass along price, um, and what other mitigation efforts are underway and and how are those reflected in guidance?

Marco Lago: Yes. As mentioned, we had a positive conversation with our customers. We have been able to offset most of the impact through change of inco terms or price increase in some cases. Most importantly, in agreement again with our customers, we have been able to leverage our global footprint in order to minimize the impact for them and also for us. Those are the two main tools we had the opportunity to play in this period of time.

Yes, just make sure we had positive conversation with our customers. We have been able to offset more most of the impact through change of income, or price increase in some cases.

Most importantly.

In agreement. Again, with our customers, we have been able to leverage our Global footprint in order to minimize the impact for them. And also for us

Those are the 2 main tools. We we had the opportunity to play in this period of time.

Matt Larew: Is that something that might have even more benefit next year as we think about our models and margin trajectory?

Okay. And is that something that might have even more benefit next year as we think about our models, and margins trajectory,

Marco Lago: Again, in Fisher, we are installing capacity, and every quarter, every year, so we are going to benefit from the Fisher plants. It is also true that today is a little bit early to understand what it would be the evolution of this tariff.

Is a again in future. We are installing capacity and every quarter every year. So we are going to benefit from the future plans. Just through that today is a little bit early to understand what it to be the evolution these studies.

Matt Larew: Okay. One more on margins, just from a guidance standpoint. I guess it depends on where you come out in terms of revenue, whether it is the high end or the low end of the range. I just want to make sure I am doing the math correctly. At the midpoint of the range, from a revenue standpoint, is then you go down to the operating margin line to get 150 bps of operating margin expansion, your guidance. Do you essentially keep operating spend about flat year over year, the second half of this year versus the second half of last year?

Okay, and 1 1 more on margins, just from a guidance standpoint. I mean I guess it depends on

Where you come out in terms of Revenue, whether it's the high end or the low end of the range, but I just want to make sure I'm I'm doing the math correctly at at the midpoint of the range from a from a revenue standpoint is, then you go down to the operating margin line to get 150 basis points of operating margin expansion. Your guidance,

Do you essentially keep operating spends about flat year-over-year, um, the second half of this year versus the second half of last year?

Marco Lago: Yes. The margin expansion is driven, as mentioned, by high-value products. We raise our guidance from 39% to 41% to 40% to 42%. So we have more confidence. We are very well covered in our backlog for high-value products. Moreover, we recalculated the depreciation after six months. You know, we have, you probably noticed, we have a large amount of assets under construction. So we played a little bit conservatively at the beginning of the year. Now we can estimate a lower level of depreciation. This is driving the increase in operating profit. Obviously, depreciation is not impacting our EBITDA and adjusted EBITDA, and we are reiterating our guidance for EBITDA for the year.

Yes, the margin expansion is driven as mentioned by high value products. We raise our guidance from

39 to 41% to 40 to 42. So we are more confidence. We are very well covered in our backlog, for high value products. Moreover, we

Recalculated that depreciation after 6 months. You know, we have— you probably noticed we have a large amount of assets under construction. So we played a little bit conservatively at the beginning of the year. Now we can...

Uh, estimate the lower level of depreciation. So this is driven driving the increase in operating profit, obviously depreciation are not impacting our Aid and the just the bit. And we are reiterating our guidance for a bit for the year.

Matt Larew: Okay. Very last one, another modeling question. Tax rate. It does look like you bumped up second half tax rate assumptions to around 27%. What drove that? Is that the new tax rate moving forward?

Okay. Very last 1. Another model in question, uh, tax rate. So um it does look like you bumped up second half tax rate assumptions to around 27%. Um what drove that and is that is that the new tax rate moving forward?

Marco Lago: This is not something that is impacting the cash of the company. It's more related to the fact that in executing our optimization plan, we are considering the risk of not fully recovering some deferred tax assets in Denmark, where we are moving part of the activities from Denmark to Italy. So we are taking a cautious approach waiting what is going to happen toward the end of the year with the deferred tax assets.

This is not something that is impacting the cache of the companies, more related to the fact that in executing our optimization plan, we are considering the risk of not fully recovered some deferred tax asset in Denmark where we are moving part of the activities from Denmark to Italy. So, we are taking a cautious approach waiting. What is going to happen toward the end of the year with the first axis.

Matt Larew: Okay. Thank you very much.

Okay, thank you very much.

Conference Operator: The next question is from Matt Larew of William Blair.

The next question is from Mac atach of Stevens Incorporated.

Matt Larew: Hey, good morning. Just a few from me. You mentioned in your prepared remarks that you are well positioned to benefit from some onshoring announcements that have been announced recently. I am just curious to gauge where.

Hey, good morning. Um

Speaker 1: all think you all can benefit the most, and if you're seeing any incremental interest today in Fisher's or within your engineering offerings.

Uh, I'm just curious to know gauge where you all think you can benefit the most. And if you're seeing any incremental interest today in Fishers or within your engineering offerings.

Speaker 2: Yeah. I'm sorry, Mac, but can you repeat that? You slightly broke up on our end. Apologies. Just the first part.

Yeah, I'm sorry, Mac. But can you repeat that? You slightly broke up on our end. Apologies, just the first part.

Speaker 1: Yeah. Apologies. Can you hear me all right?

Speaker 2: Yes.

Yeah, apologies. Can you hear me? All right?

Yes.

Speaker 1: Awesome. Yeah, I was just curious. You mentioned in your prepared remarks that you are well positioned to benefit from the onboarding announcements that have been announced recently. My question is, are you seeing any incremental interest today within Stevanato Group S.p.A.'s or your engineering offerings? From your perspective, where do you think you are most well positioned to benefit?

Awesome. Um, yeah. I was just curious. You know, you mentioned in your prepared remarks, that you're well, positioned to benefit from the ongoing announcements that have been announced recently. Um, so my question is, is just, are you seeing any, any incremental interest today within fissures or your engineering offerings?

Speaker 2: Okay. So, just to confirm, it is related to Franco Stevanato's comments on the investments that we are seeing from customers related to those manufacturing investments in the United States and those U.S. onshoring initiatives and the demand that we anticipate from that.

And, uh, from your perspective, where do you think you're most well-positioned to benefit?

Coursecall Conference Operator: Yes, correct. Yes. We started from, let's say, end of March of this year, we are starting to see a changing on the strategy. In particular, our big international clients, also some biosimilars, to review their installation of capacity in the United States. Thanks to this change of strategy, Stevanato is looking to have some benefits. First, from an engineering point of view, this will give us the opportunity to sell more technology, in particular, around inspection systems and also around assembly technology. Even more through our greenfield plants in Fisher, automatically, we can better offer a sophisticated supply chain from the United States that, in terms of EZ-fill vials products, in particular, and devices, we can really build dedicated capacity for their U.S. utilization. In fact, we are happy for this. We are proactively working with our customers on this direction.

Okay, so just to confirm its related to Franco's comments on the Investments that we're seeing from customers, um, related to those manufacturing investments in the United States. Some of those us on Shoring initiatives and the demand that we anticipate from that. Yes, correct. Yes, we started from. Let's say March, end of March of this year, we are starting to see a changing on the strategy in particular. Our big International clients. Also some bio similar to, um, review their installation of capacity in United States. So, thanks to this change of strategy. Where 7 is looking to have some benefit.

First from engineering point of view, this will give us the opportunity to sell more technology in particular around. Inspection machine. Also around assembly technology.

Even more through our Greenfield planting features automatically we can better offer a sophisticated supply chain from United States that in term of easy field product in particular and devices. We can really build dedicated capacity for the US authorization. And in fact, we are we are happy for this. We are proactively working with our customers on this direction.

Speaker 1: Appreciate it, Billy.

Appreciate go.

Lisa Miles: The next question is from Steven Moyles of BNP Paribas Exane.

The next question is from Stephen Moyes of BNP pariba aain.

Franco Stevanato: Thank you. I think that was Curtis Moyles. Thanks for taking my questions. I just have a couple, please. First, on the engineering segment, I wanted to see if maybe you could give a little bit more color about how we can think about it in 2026, especially with some of these projects being pushed out, I guess. Are you expecting kind of a rebound in growth and margins pretty quickly in the year, or is it going to be maybe more back-end loaded? I do not know how much precision you can give there. Also on that, potentially expanding the footprint in Italy, do you have maybe a timeline in mind for that?

hey, uh,

so I just have a couple please first on the engineering segment. I wanted to see if maybe you could give a little bit more color about how we can think about it in 2026, especially with some of these projects being pushed out, I guess. Um, are you expecting kind of a rebounding growth in margins pretty quickly in the year? Or is it going to be maybe more back and loaded? I don't know how much Precision you can give their um and then also on that potentially expanding the footprint in Italy. Do you have maybe a timeline in mind for that?

Speaker 2: Okay. Just to confirm your questions, engineering color on 2026, rebound on margins, and then a question related to the activities we are moving to Italy.

Okay, so just to confirm your questions, engineering color on 2026 uh rebound on margins. And then question related to the activities we're moving to Italy.

Coursecall Conference Operator: About 2026, we will provide the guidance, as usual, in a couple of quarters. It's a bit early to go through the segments and the evolution of each segment for 2026. Nevertheless, we mentioned before that the trajectory you expect positive going out from the legacy projects and the problems we faced related to the supply chain and the workload we mentioned during the pandemic. It's a little bit early to provide color about 2026.

So about the 2026 is we will provide the guidance as usual in a couple of quarters. So it's a little bit early to, to go through the segments and evolution of each segment for a 2026. Nevertheless, we mentioned before that, the trajectory we expect positive,

Marco Lago: Regarding the footprint strategy, we already started in the second part of last year to optimize our footprint. In the last two, three years, in particular, the plants in Denmark increased a lot because we received many orders from special machine, standard assembly technology, but even more what we call this complex new prototype of high-speed technology for devices. Through what we call our optimization plan, we are building three different sizes that are becoming center of excellence. In Denmark, it became center of excellence for assembly technology and backup for inspections. Italy to be center of excellence for glass forming and then in inspection. We have the plants in Bologna that we are using in order to make what we call customized prototypes for new particular technology.

going out from the Legacy projects and the problems we Face the related to the supply chain, and the workload, we mentioned during the pandemic, but it's a little bit early to provide call about the 2026 and regarding the

Footprint strategy. We already started in the second part of last year to um, optimize our, uh, footprint to in the last 2. 3 years in particular, the plants in Denmark increased a lot because we received many orders for inspection machine, standards and Technology. Might even more what we call this complex, new prototype of highspeed, the technology for devices. So through what we call, our optimization plan, we are building 3 different sides, that are becoming Central of Excellence that much is it became Center of Excellence for assembling technology and the cap.

Marco Lago: In this way, we have three sites, each one specialized for one product line, and they can serve as a backup if in a certain quarter or period there will be some particular orders. This is the way that we are going to review our footprint strategy in our engineering divisions.

For inspections, Italy to be center of excellence for glass for me and in inspection. And then we have the plants in Bologna that we are using in order to make what we call customized prototype for new particular technology. In this way, we have 3 side, each 1, specialized for 1 product line, and they can serve as a backup. If a certain quarter or period, there will be some some particular orders. This is the way that we are going to review our footprint strategy in our engineering individuals.

Franco Stevanato: Okay. That is helpful. Thank you. I think if I could just squeeze in one more too, I wanted to touch on vial order patterns that you are seeing recently. It sounds like it is improving there, but can you talk to maybe like lead times? Are they back to pre-COVID norms? Are you seeing kind of customer inventories at a normalized level? Finally, where is kind of utilization sitting for these vial manufacturing lines?

Sounds like it's improving their but can you talk to maybe like lead time, so are they back to preco Norms? Um, and are you seeing kind of customer inventories that are normalized level. And, um, finally, where is kind of utilization sitting for these file manufacturing lines?

Marco Lago: Again, like I mentioned at the beginning, we gradually see improving practically in all our markets, in all the regions, in all the clients, the small, medium-sized clients. There are certain clients that are back on track with the original pre-pandemic situations. Other clients, in particular, the big clients that serve many therapeutic drugs, many types of vial configurations that they still have some inventory. Based on this assumption, we see that throughout 2025, the vial market will move a sort of versus a sort of normalizations.

Again, like I mentioned at the beginning, we gradually see improving practically in all our Market, in all the region in all the clients that the small medium sized clients that are certain clients are back on track with original pandemic situations. Other clients in particular, the big lines that serve many therapeutic drugs, many type of viral configuration that they still have some inventory. So, based on this assumption, we see that with throughout the 2025, the viral Market will move a sort of versus a sort of normalization.

Franco Stevanato: Great. Thank you.

Okay, thank you.

Lisa Miles: The next question is from Yuko Oku of Morgan Stanley. Understanding that your offering and services address a critical aspect of drug manufacturing, given the uncertainty that the biopharma industry is facing today, are you seeing any pricing pressure broadly in the industry as pharma companies try to get best value for the cost?

The next question is from Yuko oku of Morgan Stanley.

Um understanding that you're offering and services address a critical aspect of drug manufacturing. Giving the uncertainty that biofarma industry is facing today are you seeing any pricing pressure? Broadly in the industry as Pharma companies, try to get best value for the cost.

Marco Lago: Today, what do we see? The big priority of our big clients is to secure the supply chain. Today, if you look in particular at the biologic market, they are starting within the last time in advance to secure the capacity, both in particular in Europe and the United States. Making an example, on syringes, they want to secure their capacity in order to be able to fulfill their demand for the existing commercial program, but also in particular for the pipeline that they are launching in phase two and phase three. The same is for the cartridges to fill. Also, we are starting to see more and more that due to NX1 requirement, many clients are moving with the new, what we call, flexible technology. Practically, they are moving from using bulk glass containers to EZ-fill vials.

so today what we see the big priority of our big clients are

Marco Lago: It is rare that for high-value products, we are under pressure about pricing. It is more common that the market is looking for well-established players with a global footprint, one superior quality. Let me do some, I will say, sales marketing. Our next technology in this moment is really the right answer to this superior quality requirement for this sophisticated biologic product.

Secure the supply chain today. If you look in particular, the biologic Market, they are starting with the, in the last time, in advance, to secure the capacity, both in particular, Europe, and United States, making an example on syringes. They want to secure their capacity in order to be able to put the demand for the existing commercial program. Also, in particular for the pipeline that they're launching in face with 3, the same is for the cartridges, Ste 2 field. Also we are starting to see more and more that due to. And next 1, requirement many clients are moving with the new. What we call flexible technology in Practical, they are moving from using bulkhead glass, container to easy field. So, is rare that for high value product, we are under pressure about the price is more common that the market is looking for, well, established players with a global footprint, 1 superior quality. And

Let me do some and say it says Market, in the, our next technology in this moment is really the right answer to this superior quality requirement for the sophisticated biologic product.

Speaker 2: Thank you for the color. I just wanted to ask a question on margin. With good progress on the legacy projects from Denmark in the engineering segment, how should we think about cadence of engineering margin improvements in Q3? Should we anticipate a stepwise improvement for the engineering segment now that the majority of those projects are complete, or more gradual improvement over the remainder of the year?

Thank you for the color and then I just wanted to ask a question on margin with good progress on the Legacy projects from Denmark and the engineering segment. How should we think about Cadence of engineering margin improvements in 3Q? Should we anticipate a stepwise Improvement for the engineering segment? Now that majority of those projects are complete or more gradual improvement over a remainder of the year?

Coursecall Conference Operator: In our model, we expect sequential improvement in Q3 and Q4. Nevertheless, this is based on the assumption to win soon the contract shift from the second quarter to the second half of the year. Our model is a sequential improvement in Q3 and Q4. On one side, we are exiting from the legacy low-margin projects. We have very positive negotiations with our customers. We are close to finalizing contracts. This is our model today of a sequential improvement.

In our model, we expect sequential Improvement in Q3 and Q4.

Nevertheless, this is based on the Assumption to to win as soon, the contract shift from the second quarter to the second half of the year. So our model is a sequential Improvement in Q3 and Q4, uh, on 1 side, we are exiting from the Legacy low margin projects.

We are, we have very positive negotiations with our customer. We are close to finalizing contracts.

but,

So, this is our model today of the sequential Improvement.

Speaker 2: Thank you.

Thank you.

Lisa Miles: The last question is from Dan Leonard of UBS.

The last question is from Dan Leonard of UBS?

Conference Operator: Thanks for the time. First off, I was hoping you could talk about the impact of GLP-1 compounding on the demand for vials and whether that is even a relevant demand driver.

Thanks for the time.

First off, I was hoping you could talk about the impact of GLP-1 compounding on the demand for vials and whether that's even an irrelevant demand driver.

Coursecall Conference Operator: As you know, we are providing many different formats for GLP-1s, predominantly syringes and cartridges, syringes both in dual chamber and normal configuration, and also cartridges both in bulk and sterile configuration. We see vials as another option, but it's not the predominant format related to GLP-1s.

So, as you know, we are providing many different formats for glp ones, uh, but I don't mean until both in, uh, dual chamber. Normal configuration also cartridges both in bulk and sterile configuration.

Via as we see bias as another option, but is not the predominant format related to grp ones.

Conference Operator: Understood. A tariff-related follow-up, how much of your U.S. demand is supplied from the U.S. at this point, and where does that go over the near term?

How much of your us demand is supplied from the US at this point and where does that go over the near term?

Coursecall Conference Operator: So up to now, the greenfield plants in Fisher is at the beginning. So it is really a small portion of our revenue that we sell from our U.S. plants. Quarter after quarter, year after year, the goal is that this plant in Fisher, it will be the plant that is going to serve the U.S. market.

Up to now uh the Greenfield plants in Fisheries at the beginning. So it's really a small portion of our Revenue that we serve from our us plants.

A quarter after quarter. So yeah, 3 year the the goal is that this planting feature, it will be the plant that is going to serve the US market.

Conference Operator: Thank you.

Thank you.

Lisa Miles: Ladies and gentlemen, that was the final question. Thank you for joining. The conference is now over, and you may disconnect your telephone.

Ladies and gentlemen, that was the final question. Thank you for joining the conference is now over and you may disconnect your telephone

Matt Larew: Don't go around triggering young girls' hearts. Hey, excuse me. My mother always told me, "Be careful who you love. Be careful what you want.