GVS S.p.A. (GVS) Earnings Call Transcript & Summary

Good afternoon. This is the conference operator. Welcome, and thank you for joining the GVS First Quarter 2025 Results Webcast. [Operator Instructions]. At this time, I would like to turn the conference over to Massimo Scagliarini, CEO. Please go ahead, sir.

Thank you very much. Good afternoon, and good morning to everybody, and welcome to the first quarter presentation of the GVS Group. So, a quick snapshot on the number. First quarter sales at EUR 107 million, plus 3.2% versus the previous year. In reality, this number is definitely higher. We had an exceptional event in Monterrey that delayed EUR 2 million sales, plus Boreas start only in February when we were expecting this in January. But then later on, Marco will give you more detail. But definitely, this plus 3.2% was expected more aggressive, but we are already recovering this. And so, apart from this exceptional issue on the second quarter, we are definitely already on the right path. A nice growing of the EBITDA, plus 6.1% versus the previous year, but I believe now you are mainly used to this. We do our work very hard, and we keep working in the right direction. We are with the margin in the first quarter at 24.1%. So we improved 70 bps. Of course, you know that the job is not finished here. By the end of the year, we are expecting another important step. Nice improvement in the net income also, plus 21.6% versus the previous year. We reached EUR 12 million, and we bring the marginality to 11.2% from 9.5% of the last year. So again, we are working in the right way to keep improving our profit and our sales. Net financial position at EUR 275 million, and this bring our leverage 2.5, of course, post-merger and acquisition. Let's see now some other detail. So as you can see, Healthcare and Life Science, 6.1%, but in reality, definitely higher if we consider the exceptional conditions that I just mentioned to you before. Suffering on the Energy & Mobility, but this is the actual situation. We believe we can improve something during the year, but it's really a day-by-day type of prediction. Safety, 4.9%, not the 9% that we were expecting. But again, we are back on trend on the second quarter. So definitely very confident to keep the result as we expect. EBITDA from EUR 24.3 million to EUR 25.8 million, plus 6.1% and a very nice 24.1% versus the previous year, 23.4%. So the 70% improvement. Net financial position, I believe here is very clear that we closed the year with a leverage of 2.1, then we had in January, the M&A of the Boreas project, and this brings us to the 2.5. Again, our target is to be under 2 by the end of the year, and we are definitely in the right path to reach this result. Now I will leave the speech to Guido that will give you some more detail and insight for this first quarter.

Thank you. Good morning and good afternoon to everyone. So let's comment now the value analysis of the sales. So the 3.2% yearly growth, reported growth, is positively impacted 0.9 million by positive FX, and that's resulting in a growth excluding FX of 2.3%. This is a mix between the volume, 1 million of volume effect, and EUR 1.5 million of net price effects. Now here, it's important to stress that, as Massimo said, this number has been affected by 2 extraordinary events. The first one is that the humanetics perimeter that we acquired, as we were expecting, just contributed for 2 out of the 3 months of the quarter simply because the closing occurred in mid-January, and then we had a couple of weeks just to preparation and put the integrated perimeter at full speed. So that result in a contribution on only 2/3 of the full contribution in the quarter by the pneumonetics perimeter. And the second is linked to our production delay that we had in our plant, the Mexican plant of Monterrey. This amount for approximately 2 million euros of sales that we are confident to recover across the year. So now moving to the next slide, you see the contribution by division and by subdivision. This is the first time we report with the new subdivision of the ICRM Life Science, so the BEGTech, the Transfigiometric, and Life Science. That has come in the Meditech division. Subdivision includes the former business of liquid and air, and gas, plus the business of the membrane that was previously included in the laboratory segment. And except the business of SCT, SCT was really including the liquid, now is part of the Transfusion medicine, together with the newly acquired business of hemonics. And finally, the life sciences part of the remaining life sciences part is equal to the former laboratory segment, less the membrane that has been transferred to the Medtech. The rationale has been already commented during the last call, but basically, we want to reflect what is the final channel, final end channel, safe channel of this division with the Medtech that is dedicated to the professional B2B customer, the life science that is a consumer laboratory consumable that's sold to more B2C type of sales and finally, the transfusion medicine that will include everything that's related to blood transfusion worldwide. Now let's comment on performance. Let's start from the CapEx. It is the, I must put the contributor, largest contributor for [ EscharExcellence ]. And the 1.7%, the decrease of 1.7% is entirely linked to this production delay I mentioned before in the Monterrey. Otherwise, we would have expected a growth in the division. The Transfusion magazine is, of course, obviously, impacted by the Delta perimeter due to the M&A impact. And then in terms of Life Science, please note that going forward, given the Life Science is a time business compared to the rest of the division, we will have some volatility across the quarter. However, when we're going to see it on a yearly basis, of course, this quarter is spikes. We expect that will stabilize. Safety is up almost 5%. Also in that case, Massimo mentioned, the reason on order came just across the 2 quarter that will be reflected in the second quarter. In the second quarter, we see very positive trend to this business. So we expect that on first half basis, the high single digit growth would confirmed, while the mobility is still suffering from the weaker automotive market dynamics. And now I'll leave the floor to Marco.

Okay. Thanks, Guido. Hello, everybody. Let's start with the EBITDA balance analysis. Q2 versus Q1'25 versus last year, Q1 last year. We already said that the EBITDA margin went up by 70 bps. I want to add that we went up by 70 bps, notwithstanding the dilutive impact of the acquisition. The impact of the acquisition has been negative in terms of EBITDA margin by around seventy bps, which means that if you look at the same perimeter of last year, we improved the performance by around 140 bps. So the EBITDA margin without dollars would have been 24.8%. Then let's look at the balance analysis of EBITDA in absolute terms. We are up from EUR 24.3 to EUR 25.8 million. So more or less EUR 1.5 million, of which EUR 30 million is coming from Boreas and EUR 1 million is coming from the old perimeter. The dilutive impact of Boreas is shown by the 0.8% negative mix impact. As for pricing, I want to highlight that as for pricing, we are perfectly aligned with last year's performance and with our guidance, which means that we are increasing pricing year-over-year by around 1.5%. Now let's go to the next chart. So I want to focus on the right side of the slide. So the adjusted net income, excluding the FX impact, which is mainly a noncash item related to the U. S. Dollars to the loans in U. S. Dollars from GUS SP to the control companies, which funded the acquisitions. You see that we are going from CHF 9.9 million to CHF 12 million, 21.6% increase. And as a percentage of revenues, we go from 9.5% to 11.2%. This improvement is mainly related to the improvement of EBITDA, but it's also generated a portion, around CHF 0.5 million is generated by lower interest paid to the banks. As you know, we are deleveraging, so we have a positive impact also on the financial charges. As for the adjusted net income that you look on the left side, you see the figures are impacted by the effects, which was highly positive last year in 2024, positive of CHF 4 million, and negative this year, CHF 5.7 million. But if you want to have a fair approximation of the trend of the business, you should look at the right side of the slide. And as I already said several times, this figure gives you a very good approximation of our ability to generate cash. So more or less EUR 12 million in the quarter, it's around EUR 4 million by month. And now cash. So let's go to the net financial position. You see, net financial position, we closed the year with EUR 220 million roughly, EUR 219.8 million. Then we made the acquisition. The impact on the financial position or the acquisition is around 55 million. If you make the sum of the 2 of the net financial position at the end of December and of the M&A, you end up with EUR 274.5 million. So this is the, let's say, the net financial position at the end of the year, restated after the acquisition. And it's not by chance that we end up with a net financial position at the end of the quarter, which is roughly again EUR 275 million, which means that our net financial position was flat during the first quarter because we generated more or less EUR 10 million, EUR 12 million from the operating business. But our stock went up by around EUR 12 million. This is the [indiscernible] stock. You see delta networking cap is mainly that stock. So we generated cash. The cash was absorbed by the increase in the stock. And this is something which you already saw last year and the year before. Last year in the first quarter, our net financial position was EUR 2 million worse than the end of the previous year, and we have more or less the same impact this year, which means that we are perfectly aligned as for the net financial position with our guidance. So we confirm that the leverage ratio at the end of the year is going to be lower than 2, which means that we are starting to generate cash already in the second quarter. We expect more or less EUR 10 million cash generated in the second quarter. And now back to Massimo.

Yes. So we thought it was important to give you some update on the tariff, even if every day is changing. So I would say that today, is less stressed by the tariffs. But nevertheless, for us, tariff, as we have mentioned many times, represent an opportunity. And this is because we have a very nice consolidated production footprint in the U.S. So tariff will allow us to grow our business in U.S. The tariff actually in place, so what is existing right now, if we don't do anything is related just to a very small amount of product that we send from Italy to U.S. and will account 50 bps on the whole year. But again, if we don't do anything, we don't increase price, we don't move machine into the U.S., we are still at the window. Right now, as you have seen, tariffs are already in, but our EBITDA is moving in the right direction and is improving day after day. Just to make it clear to everybody because we received a lot of questions, Mexico is not impacted, our type of production is not impacted by tariff for the U.S. MCA compliment products. So we are not affected by tariffs in Mexico. Guidance. Fully confirm, we are moving in the right direction, mid-high single digit. Again, I know that the 2 exceptional events that we had in this quarter might have surprised you, but that have already been recovered in the second quarter, and this is our visibility. Adjusted EBITDA, again, improvement of 150 to 250 bps and leverage ratio below 2. I believe we have finished. So we are more than happy to move to the Q&A session.

[Operator Instructions] The first question is from Anna Frontani of Berenberg.

I have only one question because I think there was some loss in translation here. Can you please clarify how much of that growth of the 3.2% is actually like-for-like and how much is linked to M&A? And also, please, if you can touch on the topic of the intercompany sales related to Haemonetics, please?

Okay. I think I already spent a few words, but Guido, do you want to give me some more marco, I don't know.

Okay. Anna, thanks for the question. Calculating the like-for-like growth rate can be misleading, is misleading. I will explain you why. You remember that last year, GVS was selling blood filters Haemonetics. Haemonetics was buying the blood filters from GVS and making and selling the whole blood cells, which means that in order to calculate the like-for-like growth rate, I should adjust 2025 sales by doing 2 things. I should remove the sales to third parties generated in 2025 by the acquisition. But I should add back the intercompany sales of the [indiscernible]. Honestly, if you ask me and if you measure through the like-for-like growth rate, I'm very happy about that because it means that if I'm bad at the managing my working capital, which means if I increase the intercompany sales of block [indiscernible] from one division of GVS to another division, the division we have just acquired GVS, I have a very good increase in the like-for-like growth rate. But honestly, our job is to decrease the working capital. Our job is to decrease the stock. So we want to decrease the intercompany sales of [indiscernible]. So if we do that, if we decrease our working capital, if we decrease our intercompany sales, we decrease also the [indiscernible]. That's why [indiscernible] they were not calculating and sharing the like-for-like. And they said we gave you a guidance. The guidance says in terms of sales mid-high single digit, which is more or less 7%, 8%. And they said we are aligned with that guidance. The only reason why we are not at 7%, 8% in the first quarter is due to very precise events. The fact that Boreas is starting in February and Boreas, each month, the incremental sales from Boreas, EUR 2 million, EUR 2.5 million, which is 2% growth. And then with [indiscernible] also, we had a specific issue in a plant, in a Mexican plant, and we were not able to deliver EUR 2 million of orders, which we are going to deliver in the second quarter. EUR 2 million of orders delivered is again 2%. So it means that due to 2 specific events, instead of posting or reporting 7% of growth, we are reporting 3%. But replacing that thinking reasoning with the like-for-like growth is technically wrong. I hope I was clear. I know it's quite complicated.

The next question is from Emanuele Gallazzi of Equita.

I have, let's say, 3 questions. Well, the first one is on the Safety division up mid-single digit. You clearly mentioned an expected reacceleration of the business starting from the second quarter. Can you just discuss a little bit more about the first quarter dynamics? And how do you see the demand evolving starting from the second quarter? The second one is just a little bit more color on the exceptional event in Monterrey, and just a clarification, if you expect this EUR 2 million to be fully recovered in the second quarter? And the third one is a very quick one. Can you just remind us the euro-dollar exchange rate embedded in your guidance?

Okay. Safety, again, it's not a question of sales. The order book is full, and we are moving at the same speed of the last year. So we are very happy. It's just that one order for one big customer has been delivered the first day of the second quarter instead of the last day of the first quarter. So that is only the difference. So no problem on the order book, and that's why we are so confident to recover everything in the second quarter. Monterrey, I will give you more color. I don't know much you know about mold injection, but we had 2 mold broken and these 2 components were critical for Reynosa for the delivery to the Brown and that delayed the delivery to Reynosa. And so if you are missing the 2 components, you cannot complete the full set, and that means that you cannot deliver the final product. The mold have already been adjusted, and we are back and we are recovering the delay. So it's just a kind of a chain event that one small thing with a very low value have impacted something with a very high value. Of course, we have already launched the doubling of this specific mall so that we will not be back in this situation in the future. The last question for you, Marco.

Yes. EBITDA guidance implies FX euro-dollar 1.10. As for the cash, you should anyway take into consideration that we have hedged 75% of the U.S. dollar money cash and the hedge rate is 1.08. So we don't expect any significant impact on the cash generated.

The next question is from Matteo Bonizzoni of Kepler Cheuvreux.

I have 2 questions. Can you provide a flavor on the revenues evolution over maybe April and maybe expectation for May, if you want? And can you confirm that net of Infragroupision elimination, let's say, you should have a delta perimeter impact on terms of revenues for the full year in the range of EUR 30 million, EUR 30 million plus, let's say. [indiscernible] The trading update for the first part of the quarter, just to understand the direction in terms of sales after this 3.2%, bridging this 3.2% to the guidance for the year now requires, as you say, an acceleration, which will be gradual, just to -- if you want to elaborate on the start of the second quarter.

Well, April is already gone. May is nearly gone, and I would not have been so optimistic in presenting you this first quarter, if I am not solid that we are moving in the right direction. I don't know, if you want to.

I think we can just say that so far, we are aligned to our guidance in terms of the first 1.5 months 45 days, to be done. The second question was about the incremental sales coming from Boreas. We said between EUR 25 million and EUR 30 million on a yearly basis, which means EUR 2.5 million per month. That's why we said before, we lost 1 month sale 2%. We lost EUR 2.5 million of Boreas sales due to the delay of the first invoice. So 2.5 times 12 is EUR 30 million.

And just for avoidance of that, we have referred several times to Boreas when we talk about whole business this is just because internally, this is called [indiscernible].

The next question is from Christian Hinderaker of Goldman Sachs.

My first one is maybe tackling the organic question a bit differently, and apologies if you just covered it, but what was the Haemonetics revenue contribution in the quarter? And how do we think about that? I think you said EUR 37 million for the full year with an H2 weighting. I guess, specifically, what I'm looking for is in our M&A line, what is incremental this year that wasn't in place last year in terms of the perimeter? And maybe that's for Boreas, but...

The question is sales generated by the new acquisitions this year, February plus March, EUR 10 million, okay? That's just sales of the blood to third parties. And this EUR 10 million is not including the intercompany sales of blood filters. So EUR 10 million is 2025. Last year, we sold blood filters, which are now intercompany. I do not remember last year intercompany last year sales of block filters. If you want, we can give you the answer after the call.

The next question is from [indiscernible] of Mediobanca.

Just a quick follow-up on my side. This is on second quarter. Considering all your answers above, is it fair to expect second quarter top-line growth to fall within the range of full-year guidance? Just a clarification on that. So mid- to high single-digit growth on a reported basis.

Yes, I would say, yes. And of course, we don't have full visibility to where the exchange rate will go, okay? Because as you know, in the first month, we had a negative impact of the exchange rate. So depending on the on ex FX, of course, we are fully aligned with our guidance. Then, of course, the effect depending on how it will evolve in the next 45 days can change reported, but not...

Consider just to give you some color in terms of the transfusion medicine for the U.S. market, we had to certify ourselves in every U.S. state before that we could start selling the product in every state. And that has required time. We are mentioning that we have lost the first month of January, but even in February, we were not full speed. So there are a lot of activity, regulatory activity that, of course, are affecting the initial quarter. But we are gaining speed. We have now all the certification, and we are moving in the right direction. And another aspect, I was speaking with my General Manager here for Italy the other days, and we were discussing because we will need eventually to return to the 717 production here in Italy. So again, these are all positive signal from my point of view.

The next question is a follow-up from Christian Hinderaker of Goldman Sachs.

I thought the tariff comments quite interesting. So I wanted to come back to those, if I may. Can I just confirm that when you say assuming no remedial actions that implies, as it stands, you've not taken any of those actions? I appreciate it's a fluid environment. And then maybe just on that point with regard to the regulatory approvals in state, should we think of that as a bit of a defensive sort of positioning for your business? I suppose in January, February time, those approvals, you might have been maybe facing less of a queue versus now if everyone is rushing to get approvals given the tariff situation?

Okay. So in terms of tariffs, our actual EBITDA of the first quarter reflects exactly our situation. So we don't have done any type of activity. We have done price increasing as we were scheduling, but that into the normal price increasing that we do every year. So this is exactly the situation. We don't have nothing special also because we want to see and to settle down a little bit the dust to understand what is the reality and what we are talking about. We are -- again, we are not too stressed because it's not a big impact, and we are recovering EBITDA from other reorganization and other important points. So it's not a stress point for us in this moment. And we don't see the tariffs that might affect in any way our guidance on the EBITDA. So that's -- I believe I gave you the picture.

I would just stress that, of course, the remedial action, we are very clear in our mind what this remedial action should be -- can be as soon as they are better. The 2 things that we mentioned here, the price increase on the vacation, I think that are, of course, in our cards. So of course, we're going to decide when to activate them as soon as we have reached the full visibility on the tariff scenario. And the second question, I lost -- can you repeat?

So you mentioned a moment ago that you had a few weeks delay with regulatory approvals state by state. Presumably, all of that was pre-tariffs. If, say, there's 100 other companies trying to seek said approvals next month all at once, might that take them longer was sort of how I'm thinking about it.

No, no, I don't think so. This is a very standard approval if you are a health care company that you need to have if you want to sell in a single U.S. state. So every U.S. company -- health care U.S. company that is selling the U.S. market already have this state approval. For us was new because we were not selling finished product on the U.S. market directly. And so we had to go through this regulatory approval. So it's even not related to the -- like the FDA. It's a very specific pharmaceutical and medical device type of approval that every state give it to you. But if you are an existing health care company, you don't need to require this because you already have...

This is the fact that it was an asset deal. So we were not buying a company. So if you buy a company, the company buys already all the license in place. We are just buying product, assets. And so we needed to reapply for all the license, just an administrative type of work, but it takes quite some weeks of time. On the other side, the beauty and what we already told several times the beauty, the positive of the asset deal is that from operational side, we will be quicker in extracting synergies because we are not buying plant, we're just integrating assets or a flip coin that is some slowdown on the administrative side.

But just again, to give you some color, exiting from the government certification or the state certification, even an existing customer because, yes, nothing was changing because Covina was still Covina, the plant where we produce solution, exactly the same. The process are exactly the same, the products are exactly the same. But for an existing customer, we were a new company because the name had changed. So they had to go through all the approval for a new supplier. And even if everything was the same before, but the name changed. And so we were obliged to go through all these approval. And this is what have slowed down the starting of the sales. But again, all this is really on our back. So we are moving now quickly towards our objective.

[Operator Instructions] Gentlemen, there are no more questions registered at this time.

Excellent. Thank you very much and see you at the next quarter presentation. Thank you.

Thank you. Bye.

[Operator Instructions] Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your devices. Thank you.