Earnings call transcript Q2 2023

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Operator

Good afternoon. This is a Chorus Call conference operator. Welcome and thank you for joining the Stevanato Group Second Quarter 2023 Financial Results Conference Call.

As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Instructions] [Operator

I Miles, turn Relations. Senior ahead, time, to conference Please like ma’am. Lisa Ms. Vice would this the to over go At President, Investor

Lisa Miles

is joining and the Executive Chief IR found website. illustrating Marco Financial our With you today’s morning, Chief and Executive for section Lago, A Good me Franco of thank Officer, today on Officer. Franco Dal Moro, results Stevanato, Chairman; be us. presentation can

earnings predictions. Actual statements report SEC. SEC risks our nature, only Some discussed in made and in and materially entitled differ the to be conjunction today we our XD Factors information you Risk filings, those annual XX-F. of latest XX-F our and filed the on We in forward-looking events recent release encourage as with being will including the in result may Item company’s with review results are most a Form face, in Form contained

not any by update company law. The required financial revise may subsequent statements Today’s as to information. or forward-looking presentation these contain assume or except reflect non-GAAP does events circumstances, obligation to

Management be uses in to its this in trends the results, analysis and performance, meaningful our gauging financial of identifying informative quality our investors information this results information and believes comparisons. of providing in may internal period-to-period

of reconciliation see the release. company’s measures, a the For please press non-GAAP most recent earnings

Stevanato to And opening remarks. for now, over I Franco the hand call

Franco Stevanato

Thank Lisa. you,

we performance execute are to of against We financial operational on as objectives. continue quarter our pleased with record our another build and track and solid

evidenced today’s all as fronts making on in progress We’re results.

low our target double-digit single-digit achieve high growth to to continue near-term We growth. of

in high-value to This our demand high-value mid-term market for achieve keeps in revenue XX% mix which, us responding shift successfully is are range track high We driving the in solutions target XXXX. from our on to solutions. towards turn,

from we’re high-value like to XX% currently growth in And through compounded XXXX growing in growth projected fastest approximately lastly, end is currently expand has which market. strong markets key are in we biologics. solutions biologics, and customer growth satisfy investment a end capacity as benefiting as annual platforms going of planned, for demand our rate Our

to weighted differentiated needs And heavily market. products the meet towards is our ideally Our biologics. this of pipeline are projects EZ-fill of suited mission-critical

have long-term several growth, we and foundation shareholder to well drive the the tailwinds are Over laid as to drive believe we we create last to the capitalize years, organic continue many sustainable, value. we positioned secular and on

Thank you. Franco. I will now to over the hand call

Franco Moro

you, Thank Franco. on X. Page Starting

results X% XX.X%. and revenue were second margin Our by of year-over-year highlighted growth, quarter adjusted EBITDA an

our to of second strong revenue. of high-value for led total During represented mix EZ-fill an which the products demand XX% quarter, increasing solutions, high-value the approximately

same quarter, the totaled excluding the year, XXX to order the intake COVID-XX EUR million increased year. period million order X%, For last EUR intake compared XXX related second last new to orders, compared new

backlog June business orders new pre-COVID since intake XXth, orders during committed backlog were signed approximately in and have million. placed As the our EUR order returned inflated as of customers totaled XXX pandemic Customers practices. to of Both advance. further the temporarily

biologic full complex chronic approximately the are This Page XXXX. of X. were is biologics. approvals, in all all biologics. and three approvals that XXXX the disease in blockbusters, approvals innovation which Let’s driving rose potential of the more of approximately are XX% and to challenging in for drugs XXXX, FDA Of we address In XX% FDA therapies new turn more to management. Pharmaceutical comorbidities paving advancements way diseases, of

and be complexity, and broad category by to are viscosity. administer to They sensitivity their Biologics due injection. stabilize administered challenging often a products of can

for designed Alba the address As EX-fill, even to products are biologics. a a storage demanding biologics our result, requirements have packaging most unique and that specifically and Nexa

biologics biologics excluding revenue revenue This and dovetails accounted have XX% for for from compared our revenue last of from XXXX. segment XXXX our business. XX% biologics growth important to an capacity increasing years, the and been for also BDS in Over expansion. couple the Year-to-date, with with driver COVID-XX, revenue of targeted of XX% related timing

currently downstream that, tailwinds demand is in strong takeaway products. see creating high-value biologics, we for secular key The

that monoclonal in advancements biologics, We including growth. continued organic drive continue antibodies, expect to will and GLPXs applications, mRNA durable, biosimilars

here facilities for Please and Fishers, advance activities and many readiness. on first turn on year. track as validation Italy. for after qualifications started plans training staff to the an in the to We’ve Italy, begin Page on In have our initial our of track and X capital months managerial we staffing projects returned update performance lines we later our remain in in the remain US to operational Indiana customer these technical towards EZ-fill immersive and

progressing expected as underway, production Latina, year. are are we commercial prepare customer end staffing of plans the as validation well the by activities and In Italy, for

customers It As a visibility work the commercial accordingly. to and capacity their expansion is and through demand we long-term our we reminder, real our customer linked with agreements. We expansion modular. is assess plans align to needs our directly have

New plan, capacity and years launch production. commercial build, requires typically validate several to for

on regulatory end rigorous unique barriers The and ability expand scale, customer capabilities, at and technical high quality intensity in integrated positions investments, capital demand to market requirements, our entry. and performance markets, expertise, natural biologics. of products deep growing This, create our us share to and strong the coupled like to with capitalize deliver

pursue our a well inclusion. as XXXX and efforts our standards for our and diversity, as published as values the GRI a efficient progress and sustainability while that report. and culture Lastly, to safety, measure We It accountability. equity solutions, highlights framework innovative health through recently fostering transparency we

receiving from sustainability. for in congratulate medal to efforts bronze a want EcoVadis, our I team recognizing our

positive do business. everywhere to growing a customers, while and supporting we making goal impact work is continue and Our

Marco. I over you. the to call will hand Thank

Marco Dal Lago

Franco. Thanks,

I I want of the to begin, comparisons refer XXXX, Before that clarify to specified. quarter all unless otherwise second

XX. Page on Starting

EUR quarter by second constant XX% growth XXXX, or segments. the basis, million currency increased of a to revenue For both on approximately X% XXX.X driven in

mix for same to last period our in of consistent growing year. progress high-value which total compared of are XX% pleased solutions, the We XX% represented with revenue the

decreased drop-off, successfully been from over expanding prior COVID-XX backfilling revenue quarter. projects. revenue for it accounted the with approximately and have year of and X% we customer XX% Despite from new in the Revenue this

Excluding of XX%. and revenue COVID-XX the revenue effects quarter increased currency, from second

quarter, into company margin its was by the For the service. facilities gross new second brings as inefficiencies profit impacted temporary

a depreciation. gross high-value the result, in in profit offset margin As rise by the decreased points was basis due XX to higher XX.X% partially increase costs solutions. expected and to industrial This

profit The costs XXX gross margin points. basis unfavorably rise in by industrial impacted

would the as We capacity second Indiana. currently These operations expect year. in commence online. same startup to in Excluding profit gross with period for are XXXX expected they these comes that continue abate into XX.X% last been costs, the have margin compared of ‘XX, will XX.X% quarter when headwinds

In the XXXX, second operating profit margin was quarter of XX.X%.

operating million margin tied was COVID-XX. adjusted the XX.X% compares EUR contract plants, same new to the of costs a in XX.X%. period last year modification to from startup X profit This which Excluding benefited

to XX% basis adjusted Adjusted EBITDA million, up was EBITDA increased XX.X XX XX.X%. margin EUR and points to

On quarter second profit million, per the XX.X diluted bottom XXXX, EUR the and X.XX. earnings delivered of for line, share we totaled EUR net of

Excluding last per EUR increased EUR startup share profit million over year. earnings adjusted and diluted XX costs, X.XX XX% to was adjusted net

XX. to segment Page results Moving on

Revenue the EUR increased XX.X other segment compared quarter, XX% delivery from Growth EUR to a the year. second high-value currency with solutions and to same on basis and containment the increased to XXX.X period from increased Solutions revenue Diagnostic XXX.X million. million, constant EUR also last X% from For X% revenue Biopharmaceutical and X%. million, was solutions

XX.X% in the segment As was increase operating quarter the expected, and were startup partially margins the gross in by of of which second BDS higher depreciation, new margin offset led by a This XX.X% of of high-value XXXX. the impacted to plants margin profit and profit in solutions.

accretive sales inspection Engineering by Gross increased driven margin lines. Engineering Revenue driven of increased of This visual for segment the XX.X% XX.X led segment million operating optimization basis in to efforts. XX from by the to higher product lines profit second XXXX. for EUR the ongoing in to XX% sales and margin points quarter profit XX.X%, mainly more strong

XX. Page On

million, a EUR we equivalents As of debt of XX, XXXX, million. cash net and of June EUR cash had XXX.X XX.X and

to million the quarter, with expansion XXX drug in containment. on we remain EUR ready-to-use solutions were second our customer for expenditures of capital high-value meet and expected, the in capacity As track demand

EUR XXXX, resulted property, plant cash working the the needs million, organic For to quarter and purchase growth million, net support XX.X activities free equipment, second of which of current which million. capital in was cash XX.X our assets generated the reflects XX.X was operating and from for business. of intangible flow EUR in used Cash EUR negative

Lastly, XX, on guidance. Page

forecasted. in to range X.XX increasing are of the realized And some in billion in adjusted X.XXX coming EPS billion. utilities EUR EUR of revenue are EUR lower the Adjusted slightly expect We in than we improvements lastly, range X.XX. diluted X.XXX which to guidance. to EBITDA continue We

This adjusted EUR we this million. have result, by related non-recurring be in million not, startup EUR effect XXX.X marginally as a offset as And EBITDA in range now will expect the mostly Indiana. training Latina impact and higher an EBITDA however, will to of to expenses on reported XXX.X

XX% XX Our revenue. range of prior to between currency million of revenue. COVID-XX, to revenue XX% our represent down XX% XXXX million. A High-value X% CapEx XXXX will to EUR represent And XX% will of approximately X%. X% guidance that XX X% to assumes of estimate will headwind solutions EUR approximately forecasted about to of from

comments. call for will Thank closing the I you, hand to Franco

Franco Moro

operate fundamentals in of financial our are end markets demand. growing we an year-to-date of characterized closing, we business are environment In pleased a with and The by robust strong, our results.

the our as on: day Our remain operational priorities as of for strategic on demand we make set executing capitalize proud to products. stage every I’m teams continue we customer progress are and our the against integrated to we laser-focused

expansion our Completing formats move prepare to growing phase customers supporting production months. R&D accelerate the we of Investing position. and pipeline in solutions, as value customer and and new by And opportunities mix the commercial high-value customers our of building through product Meeting meet and to States, innovation multi-year their scientific coming to market-leading demand a United up our the Italy chain. the maintain needs. in in turn our evolving lastly, ready-to-use current for as of

you. for Thank Operator, questions. open up let’s it

Operator

conference is the operator. Excuse me, this Chorus Call

the now The will from is session. go [Operator Donnelly question begin ahead. Instructions] Please first from We Citi. Patrick question-and-answer

Patrick Donnelly

landscape, know, show for maybe focus for know, Thank investors. on you you big talk there. competitive right backdrop GLPX you obviously the growth about certainly guys continuing you, Franco, seems, taking Great. really a the landscape, one to a for strong questions. just the Can just

what talk you’re landscape. competitive the seeing Just about there,

a would be we’d helpful You and chat on that love to But as market. know share well. anything certainly market little bit about growth

Franco Moro

GLPX. care Yeah. And Thank and have for in since in start a for are saying diabetes you, we Patrick. syringes cartridges I leadership GLPXs and strong a many, know by auto-injector value want that that for many syringes proposition pen. position the have and we you to years, we for also

allows that same opportunities for position current future franchise product. the our of in us to for is the see this So, good us

In landscape, because terms us. of are important cartridges, different In that the are in we in competitors that the player that second we competitive as see to for competitors the confirm other syringes, space, markets have worldwide. I we all other there have are we addressing said already are But leader, I in different have biologics.

important to the the also we to conversion leadership of driver space, technology. that more in this have more we in this It’s and because in this important see case see, one other, cartridges the right that say the is configuration specific position for we space

Patrick Donnelly

maybe now China. on Okay, And that’s an then update just helpful.

been of You backdrop across know, a life challenge obviously quarter. all certainly sciences, that’s this

quarter. guys you know market plans, to last the thinking you any that the appreciate helpful. I there, just backdrop would I how know, talking development paused about change it. a bit about you’re You Can be

Marco Dal Lago

fluctuations on are revenue From are around quarter, last Yeah, speaking. by we Pacific. that bit, the names. compared to mainly project I’ll driven Asia is X% in Engineering, depending our The we generated second where have we a reduction down of Pacific Marcus start. year in little Asia quarter-after-quarter,

future, the I leave For Franco. will to

Franco Moro

long-term very a for little the USA in we pause in interesting have of to focus changes the reiterate strategy CapEx in it execution prefer run, was market. one have I we because China, Pacific, because a important longer We very Italy, where China of terms the on see Yeah, where opportunities there is Asia fastest for in a investment no growing opportunities to that and decided the we the was and to near-term.

put and we for mean so, USA the our our attention And the fact to that short-term that decided the changed in Italy we strategy doesn’t in China. all

Operator

Paul from go is Knight ahead. next The KeyBanc. Please question from

Paul Knight

What’s how Moro. Fishers? Franco quickly of your Hi, XX% to revenue? talk expect to on generating thought Could revenue? in Will XXXX? will Indiana Fishers, you delivering have you Was bring it capacity XX%

Franco Moro

we that advancement Europe programs market. the year. we that in The our coming to of volume of confirmed and the for transfer in Paul. half with that Hi, we are opportunities Yes, commercial validation have line from US the next expectation the first the from

most during the plan. the start Fisher cycle the investment with then generation ‘XX to to we middle complete two, to of the year But the revenue four expected according the of ramp We this the plan in we years current are start is and the because along we will modular kind module-by-module, CapEx in will of up the approach probably we and progress next the five, a first spread modularity. year to of will module and rest – in the

Paul Knight

I growth organic with, number this now the think about you my that then what year. are thoughts XX% of potential biologic long-term around And Okay. last your question surprising been – of know, right What I emergence approvals is, been guiding to think GLPXs rate? long-term most frequent you’ve growth has XX% with investor the year,

Franco Moro

But you’re biologics, area, there’s our solution actually single customer. where not we our are a matches addressing we little a talking right, needs have we of in the therapeutic opportunities the about are

see opportunities that growth healthy our a and continue expectation to So obviously, the in embedded have to years. we are

is in And space a investing solution, where are we having because we information, with major general. driver release specific next eagerly in years. is the growth we so arrive about changes faster something the for support the also vials biological in expectation that our to of main year in this possibility to But Not the market cartridge than future, ‘XX high-value convert growth early for even space that. too to but the the as our – the consider any our no the in because

Paul Knight

Thank you.

Operator

next Jefferies. Windley David The ahead. Please question is go from from

David Windley

taking for maybe example, particular you for in uplift our high-value for are my apart on the Alba? you Nexa of products more seeing So, Or high-value or and peel Thanks to higher-end the can within you products, within more are solutions, your groups like In push standard from Hi. question. of demand comment solutions? pre-sterilized? seeing products

Franco Moro

than we Yes, and product with have three it’s lines a even cartridges I question, biologics products say but are Nexa, both, the that and higher expected or pen. very demand for is also because to see strong very interesting associated and the these for line, both because these Alba of right all auto-injector

not value So, a we in that are product very a have of nothing in opportunities. many that in where I that line, have proposition, but different solution more say happy biologics. growth drives to a say overweight our a important single we well specific is portfolio that is solution the consider to There our that as balanced portfolio of we

David Windley

Marco. including of you talk Okay. costs? Could industrial kind Maybe for detail When about industrial of a higher What question please? are comprises what you that descriptor, types costs. costs you in

Marco Dal Lago

Thanks, David. Yes.

in have we margin, commercial profit prelaunch revenue impacted and the Fishers gross startup to reported the the related of been Latina. cost the by So, non-recurring the

up. are to success secure training people ramp we of the the our So

expenses, treated would without And margin. XX.X% profit non-recurring that, done in we as have gross these are

year important point we than where difference Another year is to compared about been basis we more have to doing since beginning due have last last about the CapEx of the XXXX. depreciation, XX

XXX Obviously, we basis gaining gross the several gaining times with increase are solution high-value standard however, is are share profit high-value metric point shifting profitability the about that solution. that shift margin, offset we that where the towards we of whenever shared of the of we X%

those main consistent are we are So, in facing. with the two past. designed headwinds And plan it’s the we the

David Windley

theme for patterns order around Thank me. Patrick’s in Very of Destocking to your talking you’re helpful. Okay. been sciences. normal. for about in the to and pattern, has environment question you life a returning Kind order you. question Last similar

actually Are do – current but inventory include order that undershooting products, kind are that that lower, bleeding down such inventories. Does they containment their amount you some only you overstocked customers of are of patterns believe that of not in demand? includes your own know

Franco Moro

Yeah. general cost business. a almost you you but situation equity as back terms We also were see We for commit – the – normal of of vial COVID or and to practices orders approach, and may product referring to better vials, the see if that in recall approach in different flowing and the was back transferring a all to.

to customer that inventories some to the So, had deplete use. it

expect quarters, of that this so next the minor during of related because we And were COVID-XX relax situation the a only in will that part is business. to term vials, out vials

generally normal speaking, there the back is to is COVID then partially practices, fading, and in specifically So vials.

David Windley

Franco, before you you of you quarters, have I longer be to coming do how so think on estimate have returned in you. think much an Thank were kind levels? saying normal you said, customers it’ll

Franco Moro

stress expect because ‘XX some back say want too more to vials – we that and we time information current we normal customer ‘XX, we only in our that, expect I it’s the situation obviously, Is will better, to planning to be are and I’m also on. in to to than precise more in later deliver it referring vials. early

David Windley

you for thank Great, the answers.

Franco Moro

you. Thank

Operator

The next Please America. ahead. question Bank Derik de from of Bruin is from go

Derik de Bruin

good into Hey how just What’s to think morning. and – follow-up progression margin. question should the the on Hi, Dave’s XQ? gross XQ we about on

Marco Dal Lago

by that’s And the by associated margin both compared a expenses, XXXX the profit the Latina. expansion expand are margin non-recurring ramp the to include segment, and depreciation high-value non-recurring BDS, expect XXXX to gross for higher shifting towards year, to excluding Engineering In in expenses segments, David. compared to expect and partially in is, up in margin If also. inefficiency some we we the XXXX. we decline, slight we confirming in solution, the particular, Well, offset driven

Derik de Bruin

it. Got

about spending of You ‘XX? Can ramping sale new down how that’s as in helpful. know, think of you comes ‘XX, capacity as online a in your ‘XX? sort you should on percentage we Okay, CapEx remind CapEx as us

Marco Dal Lago

Yeah. cash CapEx. know, moment driven our XXXX negative The flow you will be expected by in

CapEx still to For model go restart today, our XXXX. on we with China to project in in Fishers. us some expect in important of have model, XXXX to in our time the level in we expect And

and So for CapEx it expect important cash another breakeven year be level. to flow we will be free to at close

For positive turn start flow. CapEx free expect and cash should the to XXXX, today, normalizing we

Derik de Bruin

Great, one question. just final very then helpful. And

seeing second delaying primary in reported It call, anything Another talking company kept an space or those of just issues, of you potential kept terms projects in Are on in half. sort packaging you timing they the that of injectable timing comment customers the know drug or yesterday. about sort along some the customer And up. was unusual particularly coming anything market lines?

sort is there market end Just the in on on right of thoughts unusual now? anything your going

Marco Dal Lago

Well, our well we backlog. all, by are the Derik, fact underline first of covered we to want that

slowdown. Our backlog our than months – I six months haven’t more today But we any is guidance. the point of in center next I of the XX% can haven’t three – covering seen also or

Franco Moro

Yeah, say very reported, and their planning Derik we said. with I I customer, important future have we space. according don’t that we for that an a Marco need are have can we have opportunity because the complement growth to the what you in view in interaction for

we are a because are very base fact business segment, our about insight ground. we we our the And decision Engineering improving in the specific that we expectation customer, solid on also serving them you that can evidence that with a recall an in have is that, CapEx Engineering

Derik de Bruin

very the great for you. answer. a Have helpful. Thanks was Thank That day.

Lisa Miles

Thanks, next please. question, Derik. Operator,

Operator

Stanley. from Drew Please go Ranieri ahead. from Morgan next question The is

Drew Ranieri

for taking questions. the thanks Hi,

can in that the For said opportunities and prepared actual or thinking just you potentially But remarks kind I a maybe in new seeing be and Franco, more in first you growth into GLPXs of market, new difficulty] seeing bit maybe appreciate biologics you’re that that you. US of in detail on can customer the your [technical And give like terms relationships and about growth? anything should translate future little could we how this you’re

Franco Moro

in the almost Drew, we are Pharma. that you know Big all also

with portfolio in new have today a to their the enough we centers, are needs have insight only customer, for that tech of customer supporting So with big not CapEx, established future. we on our an talking in about volume our commercial opportunities their

in dozens in So, because the different investing we the invest expected serve are to US – opportunities, mostly of biotech we space.

you will for plan. for utilization that, new We European increase the continue commercial transfer pipeline short-term, that facility the these the US new or recall come up our plants opportunities. new part the of And may from to of of volume the to some

accelerate are answer So terms that, our of – adjust upside. the short a customer good is to modular executing investment a very decision possible based on on with future to in our insights approach, we is ready on And those needs.

Drew Ranieri

calling for COVID looks out acceleration. half. I And When Marco. specifically kind is the back Thanks. it. you’re of it for mean, guidance Got year a maybe your back like and backing the for half

this can BDS be maybe into So out to heading kind half terms for details there? in what you the in give high of us thinking level for the and Engineering we help parse should XXXX Thanks. and of like about of back just you’d year if

Marco Dal Lago

we Well, any in are double-digit for shift Nevertheless, another guidance. segments XXXX growth XXXX, you a is bit this for can our late see we year. we a COVID. both guidance, thinking bit because we the momentum, little is, so how communicate today to areas. in are overall therapeutic What we this to are guidance can the right, guidance organic confirming our little for decreased is in About

Operator

there have coming gentleman, any questions more perhaps from Miles, Ms. sorry Blair. Do no minute – from Please registered registration Matt have go at a closing this Instructions] ahead. last [Operator comments? you we William Larew time. are I’m

Matt Larew

thanks. Yeah, Okay.

given the you us will timeframe? know relative that how that of much couple sort approach, Latina? available be XXXX help or around much of maybe how And going capacity that a could modular of relative immediately they’re on longer-term expansion remind HVS basis? to frame metrics a You provide just me Maybe then Fishers to and just

Franco Moro

multiply and capacity cannot in EZ-fill plan, but the more can split can cartridges. for current our metrics production I times There is several for to industrial you that, facilities, if of say between about obviously And a expect what compare we I deliver the we different vials is double in capacity capacity than our view syringes. – to the that.

In modularity, And ramp in of the can you ‘XX we but terms four, a up, well those Fisher of talk at not is expansion not range of look regular distributed – depending if you the the or is five about not. along the years years. completely a include

Matt Larew

thanks. to Okay, those newer investments and terms investments? you returns anything expected And focused [inaudible] of expansions some then ago, perhaps in know, relative or periods capital on XX some period these five for payback CapEx on years ago of, for type of sort HVS capacity payback you highly might of have made years

Marco Dal Lago

a we Well, solution. And are is what is can most mainly, that, tell everything EZ-fill are in you almost of we them EZ-fill. investing high-value

So facilities. is we in our return. Greenfield well rate of Piombino a the new internal return above goal plant pretty here level the data at XX%. high And When Dese, past for look EZ-fill to our in return two replicate of we expect this is

Matt Larew

Okay, thank you.

Operator

time. no more this questions at are There

Lisa Miles

for you, Thank you. quarter Stevanato forward today Thank to We speaking you second the in to with thank Group’s want financial look operator. joining future. for everyone us we And results.

Operator

over. The thank gentlemen, joining. and you Ladies is for conference now

You may disconnect telephones. your

Stevanato Group S.p.A. (STVN) 28 Jul 232023 Q2 Earnings call transcript