Q3 2025 Stevanato Group SpA Earnings Call
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Speaker #7: Good afternoon . This is the school conference operator . Welcome and thank you for joining the Stevanato Group . Third quarter 2020 Financial results conference call .
Speaker #7: As a reminder , all participants are in listen only mode . After the presentation , there will be an opportunity to ask questions .
Speaker #7: 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 Mr. Lisa Miles chief Communication Officer .
Speaker #7: Please go ahead , madam .
Speaker #8: Good morning , and thank you for joining us . With me today , I have Franco Stevanato Chief Executive Officer and Marco Delago , Chief Financial Officer .
Speaker #8: 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 .
Speaker #8: 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 .
Speaker #8: 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 .
Speaker #8: 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 .
Speaker #8: 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 .
Speaker #8: And with that , I will hand the call over to Franco Stevanato .
Speaker #9: Thank you , Lisa , and thanks for joining us today . We will review our third quarter performance . Share updates on our investment projects and discuss the current market environment .
Speaker #9: We deliver another solid quarter of financial results driven by revenue growth , a record mix of high value solutions and continued margin expansion .
Speaker #9: Our third quarter financial results exceeded our expectations . We benefited from favorable timing of some products shipments in the BDS segment that were previously scheduled to occur in the first quarter , relative to the same period of last year .
Speaker #9: We also faced headwinds from foreign currency and certain tariff costs that were not mitigated , which tempered margins in the third quarter . These impacts were already assumed in our guidance .
Speaker #9: As a result , we remain on track to meet our 2025 guidance . This underscores the momentum we are experiencing from executing our strategic roadmap as we leverage and scale up our growth investments in capacity expansion to meet the increased demand for high value products .
Speaker #9: Third quarter revenue increased by 9% year over year , driven by the continued strong performance of our BDS segment , which grew by 14% .
Speaker #9: This was primarily fueled by demand in our core drug containment business , as expected , revenue from engineering segment declined as we continue implementing our business optimization plan .
Speaker #9: Our solid performance in the third quarter was underpinned by remarkable 47% growth in high value solutions , driven primarily by nexus ranges and to a lesser extent , easy fill vials .
Speaker #9: The next platform is optimized for sensitive biologics , and its high mechanical resistance makes it ideal for the seamless integration of injectors . A core pillar of our long term strategy is built around meeting the demands of high growth markets , such as injectable biologics , which require premium containment and delivery solutions .
Speaker #9: These are often sensitive drugs that require specialized glass or ready to use containers to maintain stability at integrity and ensure patient safety . Our is filled portfolio and our ongoing investments in grow capacity are intended to support customers innovation programs in drug development and life cycle management .
Speaker #9: As the pharma industry shifts to ready to use platforms that deliver superior quality , simplify processes and enhance operational flexibility , our field cartridges are setting a new standard .
Speaker #9: Most recently , they were selected by a leading manufacturer for use with a Glp1 biosimilar for type two diabetes . One of the first to receive FDA approval and launch commercially in United States .
Speaker #9: Engineered for optimal performance in handheld injection devices . Easy fill cartridges offer seamless compatibility with pen injector systems , helping accelerate time to market while ensuring reliability and patient convenience .
Speaker #9: The continued growth in biologics arising pharmaceutical innovation and the increasing trend towards self-administration of medicine remains strong . Secular tailwinds for our business .
Speaker #9: Solid demand for high value solutions and collaboration with customers on ready to use products illustrate why we believe we are well positioned to meet evolving industry demands and support patient centric solutions .
Speaker #9: Turning to the engineering segment . The team continues to make meaningful operational progress against our business optimization plan . Over the past year , we have been squarely focused on executing effectively and meeting our customer commitments .
Speaker #9: While the steps we have taken have yielded operational improvements , our financial performance is below our expectations . We believe that getting the segment back to historical performance levels is going to take more time .
Speaker #9: As we refresh the workload with new projects and reposition the segment for stronger profitability . We have a healthy pipeline of new opportunities across the engineering segment .
Speaker #9: However , converting that pipeline into new orders has been slower than we anticipated . First , as I mentioned during last call , we are strengthening the sales organization with fresh expertise and refining our commercial processes .
Speaker #9: We expect to harvest the benefits of these initiatives in the coming quarters . Second , several pending opportunities in our pipeline are repeat orders from existing key customers .
Speaker #9: The good news is that we have received positive feedback on the performance of recently installed manufacturing lines . So we are cautiously optimistic that the current slowdown , in order flow is only temporary .
Speaker #9: We believe the long term demand landscape for our manufacturing technologies remains strong as the industry expands its capacity to satisfy growing demand for injectable biologics and devices .
Speaker #9: Customers are investing in new capital projects as they onshore more core operations in United States and upgrade their technology to meet higher quality standards and more stringent regulations such as annex one .
Speaker #9: Many major pharmaceutical players have announced extraordinary investments dedicated to the US manufacturing operations . This , coupled with organic growth from on cycle investments and growth in emerging markets , provides us with added confidence in the demand outlook .
Speaker #9: Let's turn to an update on our capital investment projects in fiscal and Latina in fishers . We have several strange lines running commercial production at various stages of ramp up .
Speaker #9: At the same time , we will continue to install additional syringe lines and validate customers for the rest of this year . And throughout 2026 .
Speaker #9: Our first vial lines are being installed and qualified with customer validations expected to begin in mid 2026 . We are also advancing the build out of our contract manufacturing activities in support of a couple of large device programs .
Speaker #9: The new cleanroom is nearly completed . The first injection molding machines are on site and scheduled for installation in the coming months . We still expect the commercial activities to begin at the end of 2026 or early 2027 .
Speaker #9: In Latina , we are scaling commercial production for next syringes , which will continue into 2026 . Preparations are underway for the next phase of easy filled cartridge production to meet the rising demand for ready to use cartridges .
Speaker #9: This next phase will be powered by our new RTU 400 Easy Fill cartridge lines . They have a fully automated ready to use process designed to ensure Asceptic integrity , increased production capacity , and provide superior container quality .
Speaker #9: Our capital investments are helping us meet rising market demand for our core drug containment products amid the growth in biologics , which continue to become a large portion of our portfolio each year .
Speaker #9: Before closing , I would like to thank our teams around the world on our important ESG milestone . We were recently awarded the silver medal .
Speaker #9: This puts us in the top 15% of companies assessed globally and the 92nd percentile in our industry. This recognizes our strong performance and reflects our commitment to embed sustainability into our operations and strengthen our ESG practice.
Speaker #9: I will now turn the call over to Marco . Thanks .
Speaker #10: Franco . Before I begin , I want to clarify that all comparisons refer to the third quarter of 2024 , unless otherwise specified .
Speaker #10: Let's start on page nine . Revenue for the third quarter of 2025 grew 9% to 303.2 million , driven by a 14% increase in the segment , which offset a 19% decline in the engineering segment .
Speaker #10: As Franco mentioned , foreign currency translation was a headwind . And on a constant currency basis , revenue grew 11% . Overall financial results were better than expected in the third quarter , primarily due to a favorable timing of product shipments in the BDS segment , which were previously anticipated to occur in the fourth quarter .
Speaker #10: Revenue from high value solutions grew 47% and represented 49% of total revenue . Strong performance in the BDS segment led to a 240 basis point increase in consolidated gross profit margin , reaching 29.2% in the third quarter of 2025 .
Speaker #10: This was due to a favorable mix of more accretive , high value solutions . The financial improvements at our Latina and Fishers facilities as we scale our multi-year investment plan .
Speaker #10: While both sides are currently managing dilutive , we expect to continue to gain operating leverage as volume and revenue growth and the ongoing recovery in vial demand as the effects of this .
Speaker #10: Talking abate . This positive trends were partially offset by lower gross profit from the engineering segment and to a lesser extent , the impact of currency translation and certain tariff costs that were not mitigated in the third quarter of 2025 .
Speaker #10: Operating profit margin increased to 17.4% , and on an adjusted basis , operating profit margin rose 220 basis points to 18.5% . This improvement was driven predominantly by an increase in gross profit .
Speaker #10: Net profit totaled 36.1 million , with diluted EPs of $0.13 on an adjusted basis . Net profit was 38.5 million . And adjusted diluted EPs increased 17% to $0.14 in the third quarter of 2025 .
Speaker #10: Adjusted EBITDA increased to 77.8 million , and adjusted EBITDA margin improved to 180 basis points to 25.7% . Moving to segment results . Starting with the BDS segment on page ten , in the third quarter of 2025 , our BDS segment delivered strong results with revenue rising 14% to 266.7 million .
Speaker #10: On a constant currency basis , BDS revenue grew by 17% . The segment outperformed our expectations by approximately 10 million in revenue from product shipments that we previously expected to occur in the fourth quarter .
Speaker #10: Top line growth was driven by a record level of high value solutions , which reached 147.9 million and represented 55% of segment revenue for the third quarter .
Speaker #10: This was underpinned primarily by strong demand for high value Nexo syringes , along with the continued recovery in easy filled vials . Meanwhile , revenue from other containment delivery solutions decreased by 10% to 118.8 million due to a decline in low value syringes and in vitro diagnostics .
Speaker #10: As we transition to a larger portfolio of high value projects . This was partially offset by growth in bulk vials and contract manufacturing activities for drug delivery devices .
Speaker #10: In the third quarter of 2025 . Gross profit margin increased 400 basis points to 32% . Margin expansion for the BDS segment was driven by the favorable mix of high value solutions .
Speaker #10: The financial improvements in Latin and fissures as the site scale and the market recovery in vial demand . This tailwinds were partially offset by the impact of foreign currency and certain tariff costs , which were not mitigated as a result , operating profit margin for the BDS segment rose to 22.1% , up from 16.9% in the same period last year .
Speaker #10: In the third quarter of 2025 , revenue from the engineering segment decreased 19% to 36.4 million . This was driven by lower revenue from glass conversion and assembly lines .
Speaker #10: This offset revenue growth in visual inspection and after sales services . As expected , the segment's gross profit margin declined year over year to 10.4% due to a lower revenue and the current project mix , which includes a higher proportion of revenue from the complex .
Speaker #10: Legacy projects in Denmark and fewer new orders in the third quarter . Operating expenses were higher due to certain R&D activities . This was tied to the ongoing development and launch of our next generation Is field cartridge lines .
Speaker #10: At our Latina plant . As a result , segment operating profit margin was negative 1.1% . Please turn to the next slide for an overview of the balance sheet and cash flow .
Speaker #10: As of September 30th , 2025 , the company had cash and cash equivalents of 113.3 million , a net debt of 333 million .
Speaker #10: For the third quarter of 2025 . Capital expenditures . Total 54.9 million . Net cash from operating activities increased to 47.2 million . Cash used for the purchase of property , plant equipment and intangible assets .
Speaker #10: Totaled 48.4 million for the third quarter of 2025 . The improvement in net cash flow from operating activities , a lower capital expenditures in 2025 led to a positive free cash flow of approximately €260,000 in the quarter and 16.9 million on a year to date basis .
Speaker #10: We believe we have adequate liquidity to fund our strategic priorities and satisfy our working capital needs through a combination of cash on hand , cash generated from operations , available credit lines and our ability to access additional financing .
Speaker #10: Please turn to the next slide for guidance . Despite the larger unfavorable impact from currency , we are reiterating our fiscal 2025 guidance and still expect revenue in the range of 1,000,000,160 million to 1,000,000,190 million , adjusted EBITDA between 288.5 million and 301.8 million , and adjusted diluted EPs between 50 and $0.54 .
Speaker #10: I want to call out a few updates to our assumptions for the full year . Guidance . First , with the strength of high value solutions , we now expect the revenue from high value solutions will range between 43 and 44% of total revenue , compared with our prior assumption of 40 to 42% .
Speaker #10: Currency translation was worse than anticipated in the third quarter , and we now expect that the impact from currency will be approximately 15 to 16 million compared with our prior range of 12 to 15 million .
Speaker #10: We have fully offset this with higher organic growth . Thank you . I will end the call back to Franco .
Speaker #9: Thank you . Marco . In closing , our year to date performance demonstrates the strength of our long term strategy and business fundamentals .
Speaker #9: We continue to deliver solid results driven by growth in high value solutions . Innovation in drug content and delivery , and meaningful progress across our investment projects .
Speaker #9: While challenges remain within the engineering segment , we taken decisive steps to improve execution , reinforce our commercial teams and unlock long term value .
Speaker #9: Our commitment to supporting evolving needs of our customers , especially in high growth areas such as injectable , biologics and self-administered medicines , position us well to meet the rising demand and deliver differentiated value .
Speaker #9: The strategic investments were made . The innovation we have delivered and the trust we have built with our customers are the foundation of the strong momentum as we look towards fiscal 2026 with a healthy pipeline , strong market tailwinds and a clear strategic focus .
Speaker #9: We are confident in our ability to drive growth , and hence patient outcomes and deliver lasting value for our customers , employees and shareholders .
Speaker #9: Thank you again for your time and continued support . Operator we are ready for questions . Thank you .
Speaker #7: Thank you . 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 their touch tone telephone .
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Speaker #7: First question is from Larry Solow . CJ securities .
Speaker #11: Hello , this is Charlie Strausser for Larry . Could you perhaps give us some more color on the $10 million outperformance in the quarter ?
Speaker #11: And on the top line ? And also talk a little bit more about the mix .
Speaker #12: Yeah , sure . Marcus . Thank you for the question . So the 10 million is in acceleration to accommodate customer supply chain .
Speaker #12: Need . Offsets that were previously expected in Q4 . So basically , based on their needs , we we decided together with the customer to ship in Q3 .
Speaker #12: Everything is BDS predominantly in solution , high performance syringes .
Speaker #11: Great and high value solutions . What drove the strong growth in the quarter , and how is the trajectory look going into next year ?
Speaker #12: I would start with saying that we see strong demand in high performance syringes , particularly in Xa , as Franco was commenting . Also , Alba has good traction and also important to to underline the fact that we can see some recovery in sterile vials following the last year .
Speaker #12: The stocking we see traction in vials that is improving compared to the same period last year . Those are the main drivers for high value solution growth and this is also the main reason why we decided to update our guidance with respect of high value products .
Speaker #12: We now expect high value products share between 43 and 45 . 44% of company revenue .
Speaker #9: And is I can compliment the Marco . We see that the trajectory is robust . Our big international clients , in particular the bio customer , also , many relative biosimilars .
Speaker #9: They have a strong demand in particular on easy product like next syringes . We see more and more interest attraction on syringes and more and more we see a lot of increase in demand for the cartridges ready to fill on the different format from one ML up to ten ML .
Speaker #9: Because are perfectly fitting for their self-administration for their autoinjector or wearable devices .
Speaker #11: Thank you very much .
Speaker #7: Next question is from Matt, William Blair.
Speaker #13: Hi . Thanks for taking the question . You know , on on the margin improvement story here last quarter . You referenced that Latino was positive gross profit margins .
Speaker #13: But fishers was not yet those in quarter and quarter improvement in both . I was wondering if you could update us as to where those two today .
Speaker #13: If fishers had crossed over to gross profit margin positive yet?
Speaker #14: Yes .
Speaker #12: Well , overall we are happy about the execution of the two plants we keep on improving . Quarter after quarter . As you remember , we started the commercial production in in Latina in Q4 2023 .
Speaker #12: While in Fisher , we started about three quarters later in Latina . We keep on improving . Also , the financial performance beside the operational KPIs .
Speaker #12: And we are getting closer to a normalized gross profit margin compared with the segment . Still dilutive about Fisher mentioned , is we started commercial production three quarters after Latina is a bigger plant , is a greenfield .
Speaker #12: We are keeping on improving every quarter . We are not positive yet in in fishers in Q3 , we are continuously improving . Also the financial performance , installing more line and better leverage .
Speaker #12: Our fixed expenses . And we plan to to grow to positive gross profit margin toward the end of this year .
Speaker #13: Okay . Thanks for that . And then on engineering last quarter , you you called out sort of a KPI site acceptance test .
Speaker #13: Had significantly increased . It seemed like maybe a positive indicator . Now you're saying it's going to take more time to get back to historical performance .
Speaker #13: What's the right timeline to think about a return to growth ? Can that segment grow in 2026 ? And if not , does the recovery period look like flat revenue , or does it look more like , you know , the down 20% ish that you , you know , guided to in the back half of 2026 ?
Speaker #13: 2025 ?
Speaker #9: Yes , if I can start from the on the bigger picture of the engineering on the Q3 of last year , we share with all of you that the engineering was coming from a big record high in terms of of orders .
Speaker #9: This have also generated also an increase in complexity . So immediately with the leadership team , we launch a sort of what we call optimization plan .
Speaker #9: In particular , in order to resize the two operation plans . One is related to Italy , the other one was related to to Denmark because at that time we received a lot of orders .
Speaker #9: Focalized in Denmark . So today we continue to make meaningful , positive operational progress from operational point of view with enforce the leadership .
Speaker #9: We increased the execution on supply chain after service . So in particular on project management . So this was translated in Q1 , Q2 and Q3 .
Speaker #9: In a evident increase of number of positive side assessment tests that we have delivered to our customers that have outpaced the number compared to last year , even more , the positive signal that our customer , once they starting to run the line , they see they give a very positive feedback to all of us .
Speaker #9: Today where we are the pipeline that we have with our clients , both on historical clients and also new clients , is healthy .
Speaker #9: All the pipeline , what we see , however , that is a slow delay in the conversion into orders for many . Two reasons .
Speaker #9: To our big clients , key customer . They were waiting the final positive test of the line . Number one before to place the order .
Speaker #9: Number two and number three second . Also , we start to see some of our customers that are taking a little bit more time to re-evaluating their manufacturing footprint .
Speaker #9: So all this temporary headwind of the engineering , we see that this month after month , progressive even more from execution point of view .
Speaker #9: Also looking the pipeline that we have with our customer is giving very positive feedback for the future . Just to underline the last comment , the industry in this moment is very dynamic .
Speaker #9: We see more and more big customers expanding capacity . We see even more a lot of clients all over the world upgrading their technology because the new Réglementation must link to a next one .
Speaker #9: Also , we see this . We want to take even more benefit . Some thanks to the onshore , in the United States .
Speaker #9: Some customers are going to add even more investment . So this is the good environment where we continue to grow in the next quarters .
Speaker #15: Thank you .
Speaker #7: Next question is from Michael Ryskin , Bank of America .
Speaker #16: Great . Thanks for taking the question in . In your prepared remarks , I think you made a call out about a biosimilar opportunity or essentially winning some biosimilar business specifically for GLP one .
Speaker #16: I was wondering if you could talk bigger picture about biosimilars and how you see that opportunity contributing to growth in the coming years , specifically , if you could talk to what part of the portfolio benefits that is that does that tend to be high value ?
Speaker #16: Nexa or does that tend to be more bulk products or more routine product standard products , whether that's , you know , incremental margins or top line and just broadly , how important are biosimilars to you today ?
Speaker #16: Thanks .
Speaker #17: Yes .
Speaker #9: So usually when a biosimilars are entry into the market , when the product is going up out of patent , usually it's a benefit for company like Stevanato because this can help to enlarge the revenue in the single therapeutic drugs .
Speaker #9: So on the strategy of Stevanato always was extremely important to be part of the originator from the very beginning , this was valid on insulin , on heparin and aesthetic maps , and also even more on GLP one that our big historical insulin customer engage as many years ago .
Speaker #9: And we are deeply engaged with all our product portfolio , with our originator , but also in parallel , Stevanato is extremely active with all the with our tech center , both here in Italy , in Boston , to try to maximize the validation in all the biosimilar .
Speaker #9: In fact , today is exactly what is going to happen . We are deeply involved with all our easy field , high value product platform .
Speaker #9: We have a program of Nexa syringes . We are program on cartridge to fill . In fact , we were just sharing that we win a big program even more .
Speaker #9: We have biosimilar on GLP one , new program on pipeline for our Allena pen . So to your question is yes , biosimilar helping to further increase the revenue , usually when the product is going out of patent , 70% , it will be revenue around originator 30% .
Speaker #9: Historically , revenue that will move inside of biosimilar is exactly the strategy of Stevanato to be present in everything that is injectable . Originator and biosimilars .
Speaker #16: Okay , okay . And then a follow up , if I can , on the on the guide for the year , I think you called out effects currency is a little bit more of a headwind by , I think €2 million at the midpoint .
Speaker #16: It sounds like our assumptions for engineering should be a little bit worse . And you can talk about organic offsetting . It's so just kind of means that BDS is coming a little better .
Speaker #16: You saw the pull forward into three . Q but am I interpreting correctly that we should expect a little bit of a better pull forward in , better result in BDS for Q as well , even despite the pull forward just to to offset currency and to offset currency in engineering , thanks .
Speaker #12: Very good . Thanks , Michael . We are reiterating our guidance . Nevertheless , there are some moving pieces you mentioned a couple of million more headwinds in currency effect because , you know , Q3 was average 1.17 .
Speaker #12: The euro dollar exchange rate a little bit higher than our expectations . We are doing better in Highvalue products . We expect now to have a value products as a range of overall revenue between 43 and 44% .
Speaker #12: So significantly higher than after second quarter . On the other side , we are giving priority to high value syringes rather than accelerating the non-high value syringes .
Speaker #12: And this is also moving the mix . As Franco mentioned , orders in taking engineering is not at the speed that we were anticipating .
Speaker #12: So in our model , we we took into account of the risk . Also , after second quarter . But we prefer to adjust our model with a couple of million less .
Speaker #12: So all overall we see impact from currency . Some slowdown in engineering and acceleration in high value products , bringing more margin to BDS segment .
Speaker #16: Okay , thanks so much .
Speaker #7: The next question is from Paul Knight KeyBanc .
Speaker #18: Hi , Franco , could you tell us what is fat utilization rate in fissures and utilization rate in Latina and is it . How many years to get to full capacity , if that's possible , to answer .
Speaker #9: People in a in Latina we are continuing sorry in fissures we are continuing to install high speed line for syringes . Practically we installed the line .
Speaker #9: We do the internal validation . We do the customer validation . We start to ramp up this installation of line . We will continue throughout all the also 2026 to 27 .
Speaker #9: On the top of this , we are starting also to add capacity for Vaya in both bulk and fill configuration . In the next years we are adding capacity .
Speaker #9: We will add capacity for Alba technology like we already mentioned to you , we are extending a big program in our in our building for hosting a production of auto injector in the next year .
Speaker #9: So in the next 1 to 3 years until end of 28 , end of 2028 , we will continue to ramping up capacity .
Speaker #9: The goal is to be in a full potential at the end of 2028 . Do you we ? The goal was to invest half $1 billion that to translate into 2028 , half $1 billion of revenue .
Speaker #18: And the you were mentioning Onshoring quite a bit . I guess what you're hearing is that because of tariffs and pricing , etc. , your customers are evaluating where their factories may be in the future , but it seems like it's a step higher .
Speaker #18: I guess for possible demand .
Speaker #17: Yes , we .
Speaker #9: We start to .
Speaker #17: See .
Speaker #9: Starting from after the decade this year it was end of March of 2025 . Many clients that are coming to raise the interest to our US facility with two type of of interest , or because they were evaluating their footprint , because maybe the origin they were looking to produce in a different region of the world .
Speaker #9: And now they are thinking to put capacity in the United States. They are even more interested in boosting and speeding up the validation of our plants.
Speaker #9: And this is , let's say it was already inside of our , our , our our guidance . The good news is that we see more and more clients that are looking to totally change their supply chain .
Speaker #9: And this is going to become more new opportunity for Stevanato , because we are already in a very advanced stage of ramping up capacity in fissure , and they like the idea to speed up the validation of our plants in fissure , in particular , for our product .
Speaker #18: Thank you .
Speaker #7: Next question is from Mark Stephens Inc. .
Speaker #19: Good morning . Thank you for taking my questions . Maybe just to follow up on the order , pull through . Can you confirm if that's a single customer that's pushing forward 10 million in orders and secondly , as you look towards for Q , do you expect those volumes to continue from there , or is that more of a one time item ?
Speaker #12: And now we are not confirming that , you know , we are not . So concentrated as a customer revenue . It's a bunch of customer in the in the especially in high value products that are accelerating .
Speaker #12: Some are supply chain needs but is not a single customer .
Speaker #8: I'm sorry .
Speaker #17: I missed the second part of your question .
Speaker #19: I would just curious if those orders are going to repeat in for Q just given the pull forward ?
Speaker #17: Oh , I see , no , that's not expected . It's a pull forward from Q4 into Q3 . On on that batch of orders from those customers .
Speaker #19: I appreciate the context . Thank you . And then secondly , on engineering , you mentioned these United States manufacturing announcements . I'd just like to get a sense of what you're hearing within your engineering segment .
Speaker #19: And the customer conversations you have there . And when . That might translate to more meaningful order growth for engineering . And maybe also the BDS segment as well .
Speaker #19: Obviously , these are longer dated opportunities , but I just want to get a sense of what you're hearing .
Speaker #9: On engineering segment , what do we see that certain there are , again , very similar to the question that Paul asked to us .
Speaker #9: Certain clients that are re-evaluating their footprint , maybe originally they were looking to invest capacity in Europe or through certain CMO , and now they are seriously reevaluating or they have already approved to extend their capacity to United States .
Speaker #9: And this is also one of the reasons why we are taking a little bit more time to confirm the order . And and specifications .
Speaker #9: Other customer . They are also changing their type of supply chain . Maybe they are starting to further increase the the outsourcing through us CMO or to use to to further increase the capacity of their existing plants .
Speaker #9: So overall we see a positive trend in United States where customers are starting to more and more increase their platform for filling at a state automatically once they will build the factory , they will be even more opportunity for our future plants because automatically we will .
Speaker #9: We will have more opportunity for certain next syringe Alba to fill all devices .
Speaker #19: I appreciate the context . I'll leave it there .
Speaker #7: Next question is from David Windley . Jefferies .
Speaker #20: Hi . Can you hear me ? Okay .
Speaker #17: Yes . Hi , Dave .
Speaker #20: All right . Hi . Good afternoon . Thank you . I wanted to follow up on on Paul's question on capacity . Put a maybe slightly different spin on it on the Hcvs guidance for the year .
Speaker #20: The previous guidance for the year at , I believe you said 40 to 42 . And one Q started off pretty favorable to that .
Speaker #20: And I think at the time, the commentary was that your ability to see HCVs continue to rise as a percentage from that first quarter, you know, favorable level was somewhat gated by capacity.
Speaker #20: And when lines were coming on , so this quarter , obviously you were able to pull that 10 million forward . The trends have been pretty favorable .
Speaker #20: I guess I'm coming back again to Paul's question about capacity and utilization are lines in place to continue to support Hcvs outperformance ? You know , but for the pull forward , I guess , in the near term , or are you kind of in a position where you have to wait for additional lines to be validated before you can see Hcvs continue to move higher ?
Speaker #9: But today , David , the demand in , let's say , in the last years , most of our investments were just fully dedicated to build capacity in high value product , both in Italy , in the two plants in states today .
Speaker #9: Is it true we , the , the , the , the demand is really driven by the capacity that we are putting in place in all the locations and most probably will be continue in this way .
Speaker #9: It is important to know that there is an intense program to continue to install capacity in all formats, just to translate it into facts.
Speaker #9: In Latina , we continue to install capacity for syringes . In Latina , we will store capacity for syringes with double double chamber .
Speaker #9: We are we have this huge program to install several hundred million for capacity . Capacity for cartridges to fill in . Fissure is the same .
Speaker #9: We continue to add capacity for next syringes . We will add capacity for Alba and we will are adding capacity for . Also via .
Speaker #9: This is only for easy field on the top of this in Germany we are launching a new big size cleanroom that is going to host the produce .
Speaker #9: Alina Pen . And also we have space to further duplicate in the future . In a testing . So we are so focused to intensively execute all our investment , we will add several hundred million euros of additional capacity on high value product until 2028 , in order to really meet all the program and execute the contract that we have with our customers .
Speaker #20: That's very helpful . Thank you . Follow up question around vials . So you'd highlighted that the the particular pressure on vials , I believe if we go back to 24 .
Speaker #20: Was acute on your margin . And , you know , kind of post the pandemic and post the the decline in , in vaccine related activity , you're seeing recovery in that .
Speaker #20: I'm wondering what the drivers are of recovery in vials . Is it reorder kind of recovery of orders from your traditional clients or are you seeing new products perhaps , you know , participation in GLP one or something like that that are driving an uptick in vial orders ?
Speaker #20: Thank you .
Speaker #9: Yes , David , let's make a parallelism . Bulk vial . You have to consider like a big ocean with several hundred customers that in the last two years they started to normalize their inventory .
Speaker #9: And today , since the last four quarters , with continue to see positive signal to go back on the normalization . And in fact , I think throughout 2026 , most probably we can say that it will be back to pre-pandemic period for bulk via easy field .
Speaker #9: Via is more an it's more let's say we have some big commercial customer , but is where we see new molecule launching on the ready to ready to fill via .
Speaker #9: So we also have seen a positive traction with particular also increase of orders with new customers on is because you remember we shared that the customer were looking to clean the inventory of bulk bulk via .
Speaker #9: And then because they have the easy field , flexible line for filling , easy field vial , they are starting to place new order .
Speaker #9: So all overall bulk . We are moving to a normalization and easy field . We see also new molecule that are going to use this type of primary configuration .
Speaker #9: Easy field .
Speaker #20: Okay . Thank you .
Speaker #9: You're welcome .
Speaker #7: Next question is from Doug Schenkel . Wolfe Research .
Speaker #21: Thank you for taking my questions . So you had a really strong , high value solutions quarter that was partially offset by standard bulk coming in a bit light of our model .
Speaker #21: I'm just wondering , based on your commentary , you it seems like this is just timing . Is that right ? Or is there some other more durable shift in mix and demand that we should be contemplating as we update our models ?
Speaker #12: Beside what Franco just said about the long term view and the adoption of the sterile configuration for the year . There are a couple of factors to be mentioned .
Speaker #12: First of all , we mentioned the acceleration in the BDS or volumes previously expected in Q4 . This is mainly in high value products , so it's a pull forward from Q4 to Q3 .
Speaker #12: Then in Q3 , we mentioned also the fact that other containment delivery solutions are going down compared to the same period last year , and this is mainly driven by in vitro diagnostic and non-invasive syringes .
Speaker #12: More specifically on syringes . We have some flexible lines . So our priority is to switch the production and the revenue to our high value next syringes , rather than staying in the low syringes .
Speaker #12: So we have this type of acceleration in Q3 with the next syringes and easy field vials recovery compared with the same period last year .
Speaker #9: If I can add a little bit more in a broader picture , the goal of Stevanato in the next five , ten years is to become a fully solution provider for our customer , where we want really to sell the full integrated system .
Speaker #9: This is why , for example , the plant of Fisher is a campus that is going to provide multi capability only , all in high value product .
Speaker #9: And also this is a combination with the fact that in the last year , most of our investments are fully dedicated to high value products .
Speaker #9: So you can see some fluctuation quarter by quarter . But the clear goal of in the next years is really to be laser focused on serving the full system on high value products to our clients .
Speaker #21: Okay , super helpful . I was trying to parse out trend versus transitory . So that's that's great . An unrelated follow up .
Speaker #21: There have been a number of recent headlines around large pharmaceutical companies . You know , essentially making deals with the US government around drug pricing and recently it's been speculated that Lilly and Novo may announce a deal as soon as today .
Speaker #21: Is it logical to assume that a significant price drop in . Thus , some elastic response in terms of market expansion via Medicare and Medicaid could be an absolute good guy for packaging suppliers ?
Speaker #21: You know , I'm just wondering , as you think about these settlements potentially leading to an increase in volume , wouldn't that by extension be good for Stevanato ?
Speaker #21: Thank you .
Speaker #14: Yes .
Speaker #9: Yes , we saw this announcement . I think also today we we later today there will be a further announcement . What we can say is very similar to the question that we received before about the biosimilar .
Speaker #9: Every time that biosimilar is coming on board , this can help to further enlarge the revenue for all the industry . Usually what we see , just to put us in the position with our clients , we have a long term contract in place .
Speaker #9: The cost of primary packaging also is a product or autoinjector is really minor compared to the overall cost of goods of the drugs .
Speaker #9: So usually this we see more like a net positive effect for company like Simonato because they will translate in more orders for our products .
Speaker #7: Next question is from Patrick Donnelly . Citi .
Speaker #22: Hey guys , thank you for taking the questions . Franco . Maybe the follow up on Dave's question there on the vials . Can you just talk about where we are on the inventory side ?
Speaker #22: I mean , it feels like destocking , far less of an impact . Are we fully past that ? What's the latest you're hearing from customers on that front ?
Speaker #22: And confidence on the go forward . There .
Speaker #9: What do we see that all overall they are starting to normalize their inventory . In fact , this will translate in more normal .
Speaker #9: Forecast to to from our customer . Usually with our customer we work with what we call 3 to 5 year agreement . Then we have 1212 month forecast , three months confirm order , even more bulk related , six months confirm order if it's more easy for related .
Speaker #9: So today all overall we see that clients are starting to normalize one KPI that I can share with you . If you really compare last year with this year , the revenue around vial .
Speaker #9: If you can take a blend between bulk and easy field , we increased 12% compared to last to last year . So we see continue months after month positive signal practically everywhere we are talking about Europe , United States , Latin America and Asia .
Speaker #9: We have a portfolio of several hundred customers , but overall , the macro trend is moving slowly in the good normalization direction .
Speaker #22: Okay . That's helpful . And then I guess , you know , looking at next year , I know you guys LRP is out there kind of that low double digit range .
Speaker #22: It sounds like through this throughout this call , it's been a lot of positives between some of the regulatory stuff . Obviously the stocking behind you guys , you know , the new facilities ramping , any reason why next year wouldn't be in that low double digit range ?
Speaker #22: I think the streets around 10% next year. Just wanted to take your temperature on that. Thank you, guys, so much.
Speaker #12: As you know , we will be providing our guide , detailed guidance for 2026 next quarter . Nevertheless , what we we can tell you is that we see today positive trends for high value solution adoption .
Speaker #12: We see fissures in Latina ramping up the right in the right way , in line with our plan . We are executing our plan in engineering .
Speaker #12: So we have a positive approach toward 2026 . We need , obviously , to finalize our internal budget and objectives . But this is what we can tell you today .
Speaker #22: Understood . Thank you guys so much .
Speaker #7: The last question is from Curtis Moyles , BNP Paribas Exane .
Speaker #23: Oh , thanks for taking my questions . So first I wanted to just maybe get a little deeper into the high value solutions guidance for the year on my kind of rough math .
Speaker #23: I think it implies for Q4 a range of 39 to 42% of revenue versus 45% year to date or so . So could you maybe just give a little more color around the assumptions you have there ?
Speaker #23: And is that kind of based on customer orders or anything else to be aware of?
Speaker #12: Yeah , correct . Our guidance are implying 40 to 41% in Q4 . And this is driven by the the backlog we have in our hands .
Speaker #12: And by the fact that , again , we have been able to accelerate some revenue in Q3 that were previously expected in in Q4 .
Speaker #12: So as Franco was saying , there can be some quarterly fluctuation or acceleration depending on the mix of orders we have in that specific quarter .
Speaker #12: Nevertheless , in the medium term , both in the past , in the in the past , we saw a steady growth of the share of our high value products , and we expect to keep on installing capacity and keep on growing in the share of high value product .
Speaker #9: If I can also maybe add a little bit more color from product to customer and therapeutic area point of view , we see that we are growing in biologics a lot and inside the biologics we see traction on syringes where clients is using some autoinjectors .
Speaker #9: We see more and more increased demand from product in phase two and phase three , but also commercial on Alba . This is where we are .
Speaker #9: Extremely excited because they have a superior performance in the result of reduction of release of some visible particles cartridges to fill on different format from one ML up to ten ML are good because it's very easy to be insert in this complex device .
Speaker #9: The cartridges . It also our aligner pen is starting to feel good . Good pipeline new prospects on particular on biosimilars . So what I would like to share with you that the pipeline is spread with a very nice number of clients and therapeutic drugs in all our product portfolio .
Speaker #9: We are not just localized in one product or one customer . .
Speaker #23: Got it? Very helpful. And then quickly, on contract manufacturing, I know the press release called out strong growth in Q3.
Speaker #23: And then you mentioned fissures should start commercial activities for contract manufacturing . I think end of 26 , early 27 . So can you maybe just give some high level thoughts about how we should think about this going forward ?
Speaker #23: Is that going to become a more meaningful growth driver for the business ?
Speaker #24: So we are building .
Speaker #9: In a in a in fissure , this this production department dedicated for one high runner for auto injector , for one of our big customer that already buy from us this next ranges today our strategy , our approach on drug delivery system is our main goal is to deliver our IP product through our Alina adapters and product .
Speaker #9: That is why we are building this big clean room in Germany that we have already . We have to execute the pipeline with our customer .
Speaker #9: It's also true that we have going to . We have already contract in the selected way that we can provide the out injectors or some pen to some customer that they own the IP .
Speaker #9: And when we are already the supplier with our Alba syringes or cartridges to fill or syringe . Adnexa , practically , in order to have more a bigger contract , we are also serve this product in a form of CMO business model .
Speaker #23: Great . Thank you .
Speaker #17: Operator . Are there any other questions ?
Speaker #7: There are no more questions registered at this time . Thank you .
Speaker #17: And that concludes our call for the day . So thank you for joining us . And we appreciate the support . Have a great day .
Speaker #7: Ladies and gentlemen , thank you for joining the conference is now over . You may disconnect your telephones .
Speaker #2: Is it really love ? All stop the game . Tell it to my heart . I can feel my body rock every time you call my name .