Stevanato Group S.p.A. ($STVN)

[Audio Gap] Bank of America Healthcare Conference in Las Vegas 2026 edition. Thanks, everyone, for being here. Hope this will be a great conference. For the first session of the conference, [indiscernible] Stevanato. We're joined by Marco Dal Lago, CFO; Giacomo Guiducci, the Team IR. The format will be, we will have a couple of slides to kick it off [Audio Gap] Marco?

Thank you. [Audio Gap] Okay. Moving to the second slide. We have a long track record of double-digit organic growth. We have more than 70 years of history. And we are well positioned to be a global leader in the industry. We saw in the previous slide our unique value propositions that is a key competitive advantage for us to serve the industry with high flexibility and different type of formats and solutions. We can leverage on secular tailwinds. We see the growth of biologics, where our high-value solutions are particularly suitable for due to low silicon content, mechanical resistance. We see the growth of GLP-1s, where we won a good share of the market in glass containment solutions, thanks to the capacity and the flexibility we can provide to our customers switching from different formats, from next syringes to sterile cartridges to do under syringes. So we won a fair share of wallet. Other secular tailwind, we can see the self administration of the drug. I mentioned before the drug delivery system development we did in recent years. And what we can see beside biologics, GLP-1 and self administration, we see the trend in pharma industry to focus more and more on the core business, on drug development rather than in production. So this is positioning us as an ideal partner to serve the overall pharmaceutical industry. Following our IPO, we decided to deploy our capital predominantly in increasing our capacity in high-value solutions. We invested significantly to gain customer proximity both in Europe and North America with our plants in Fishers in the close to Rome, where we are installing more and more capacity validating new lines with customers, and we are increasing rapidly in those two new plants. We entered in 2026 with a strong momentum. We have been able to grow double digit on a constant currency rate also in Q1 2026 compared with the same period last year, mainly driven by the main segment, the BDS segment. We grew 16% on a constant currency rate in BDS segment, mainly driven by our high-value solutions that grew 17% compared with last year. They are representing today approximately 47% of our overall revenue. And we see strong momentum, strong growth in Value Solutions driven by biologics and GLP-1s. The main driver of growth has been predominantly in our next syringes that are very suitable for self administration due to mechanical resistance. GLP-1 is an important tailwind for us. We see it as a durable trend and tailwind. Today, the revenues in GLP-1s are representing between 21% and 22% of our overall revenue. We are serving the market predominantly with high-value solutions. I mentioned synergies, but we can see starting traction also in strike cartridges. 21% to 22% compared to last year's same period, we grew more than 20% in GLP-1s. [Audio Gap] GLP-1s, we went up more than 20%. So the big driver in terms of product has been again next syringes, but we are happy about the visibility we can see in the overall high-value products like Alba syringes, sterile cartridges are exceeding our Capital Market Day expectations. The conversion from bulk to Sterile is gaining traction. This is the main reason why we decided approximately 1 month ago to convert to -- into is if in to accommodate high demand. So good visibility and good growth. Engineering went down 31%. It was expected from our side due to the current moment in the visibility we have about the current backlog, the backlog we had at the end of Q4. So it's largely anticipated. We see margin expansion there following the difficult period we had in '23, in particular -- in '24 and particularly in '25 with respect of margin. We are exiting from the legacy of profitable projects in Denmark for highly complex machining assembly packaging, and we are managing the situation shown as anticipated.

That's great. There's a lot of that I want to follow up on. Maybe first on the Biologics and GLP-1 demand specifically. You called out more than 20% growth. It's in the low 21%, 22% of revenues now. That's obviously been a big driver for you the last couple of years. Have you noticed any change in customer demand in the last 3 or 6 months as oral GLPs have hit the market? I imagine that you're very close relationships with the major GLP-1 vendors. You know as much about their demand patterns as anybody will outside of themselves. Sort of what's been the latest communication and messaging from them? And how does that play out over the next couple of years in your road map?

Yes. So our strategy, first of all, is to cover the market. We are clearly working now predominantly with the big originators. Nevertheless, we are covering the market and monitoring the evolving growing situation, both in biosimilars and also other biotechs that are -- they are in Phase II, Phase III ready to issue new assets in the market. We are working with most of them, and we want to play a key role in the GLP-1 space as we are currently doing. This is driven by our ability to provide flexible solutions to our customers. So we can accommodate the pen injector roof administration to our cartridges. We can do the same with the syringes for out injectors. We have proprietary device like linen for biosimilars that are gaining traction. So we have multiple solutions to serve the market. We see a growing market for the coming years. We are, let's say, secured by long-term contracts with our key customers, the originators. So we have very good visibility for the next 3, 4 years. But in the meantime, we are covering the market. To your question, based on discussions we have with customers, the expert reports and all the data points. So we have the fact that, for example, investing heavily in injectables. We see the injectable will still playing a key role in the future. The bigger share of market, we expect to be in injectable. And we expect, as anybody has that the market is keeping on growing in the coming years. We know we are talking about approximately 10% of the overall population affected by obesity, diabetes or overweight. So it's an important market. It's a phenomenal drug, and we want to play an important role on that for the years to come. Our focus is not only GLP-1s. We are growing significantly in biologics. We see the way coming driven basically by the big pipeline in the biologics space, and our high-value products are, let's say, perfectly suitable for managing the complexity of the drug in biologics due to the low silicon content, the interaction between our containers and the biologics drugs.

Okay. And within GLPs, what about some of the changes in formulation? Can you talk about syringes versus cartridges versus vials, are you seeing any of that transition? And can you talk about how you're exposed across the portfolio?

Well, we have good visibility, a multiyear contract with the syringes on one side, but also austere cartridges. On the other side, we are installing capacity in our plant in Latina for the first high-speed ready-to-use line that will start generating revenue beginning of 2027. And we have a plan to install more lines in cartridges. So we have very good visibility for syringes, but we see cartridges gaining tractions. There can be some different route of administration depending on also on the geographical area. Europe are more used to use multi-dose pen injectors. We see a lot of traction in U.S. in pen-injectors -- but -- in our injectors, sorry, but pen-injectors are starting in About formulation, for example, we have flexibility also here. We are providing syringes. We can switch easily from producing to syringes due to our engineering flexibility. So we have many solutions to offer to the market. And again, we see our pen-injector gain interaction with the biosimilars.

Okay. And something you called out in the quarter was that you did take that one -- that one line where you switched from ready-to-use vial to ready to use cartridges where you converted an existing line that was underutilized capacity. Could you talk about that a little bit more detail sort of the buildup to that? Have you done moves like that in the past and sort of the opportunity to do that to flex the manufacturing base and your existing CapEx to meet evolving customer needs?

Yes. Again, the peak of vias has been during the Pandemic. So in '22, '23, we saw the destocking. In '24, we have sufficient installed capacity to serve the market. Today, the market in buyers, we see it growing mid-single digit on average with more traction in sterile configuration than in So looking at the demand, we saw approximately 1 year ago, the demand growing cartridges and having us not enough capacity to serve the market, waiting for the installation where 400 -- that is producing commercial revenue in 2027. So we decided with our engineering department to switch the technology from vials to sterile cartridges. And this is another tool of flexibility we have to adopt the demand without installing no new machines, but leveraging our ability to have flexibility, speed to market and lower CapEx with that.

And how long did that process take to convert that...

Well, from the decision to the start of the commercial production approximately 9 to 10 months.

Okay. All right. I mean let's talk about other capacity you're talking about Fishers Latina. You called that out in some of your prepared remarks. You've been talking about those facilities for a number of years, a lot of CapEx dedicated to that. You're sort of right on the cusp of starting reaping the gains from those facilities. Can you talk about the road map from here over the next couple of years as they come online, what we should expect for both of those sites?

Yes. The good news is that most of the CapEx has been already deployed. So we spend the money to create the infrastructure to develop and buy the machines. And so most of the money went already out. We expect now to grow significantly our revenue driven by the capacity we install. The good news is that the capacity is matching market demand. We have very good visibility. We installed so far most of our capacity for Nexa syringes for high-value syringes. We have almost completed the phase related to syringes in Latina, where we are growing significantly in terms of installation, validation and commercial revenue. In Q1 2026, Latina plant is not any more dilutive compared with the average of the segment. So we are very happy also about the financial performance. We still see room to increase in Latina because there is a high concentration of high-value products there. About Fishers, it's a bigger plant. It's a greenfield. We are in line with our plan at least to reach the full capacity, the full ramp up by second half of 2028. So we are sort of in the middle of the journey. We see improvements every quarter. So far, we sold validated and generated commercial production for Nexa syringes, too. Also in Fishers, we will be starting the production of drug delivery system in the second half of this year. And for 2027, we plan the installation of Alba syringes. And we have already sold also a steroid virus line that will be validated in the coming quarters.

Okay. So -- and when you talk about full capacity by second half 2028. That's when you'll see sort of full margins as well?

Absolutely. In the meantime, you know it's a continuous improvement. Same way we saw in Latina quarter after quarter is getting better, same in Fishers. And it's important to underline the fact that they're on top of the two sites represented in 2024 and 2025 for the P&L, obviously, because you need to set up the organization, train the people, validate the lines. And in the meantime, you are not generating revenue in each single line you are validating. So now the situation is much better. Also in Fisher, we validated almost all the lines with a very important customers in U.S. So we are now ready to take advantage of the growth revenue and higher profitability. I didn't mention probably enough the plan we have for expanding Latina for easy field cartridges. We have an important anchor customer here with me many years of visibility about the production of sterile cartridges. And it's very important for us because being the market leader in bulk cartridges, we believe is very important for us that the market is switching to sterile solutions. Today is a very low penetrated market with lower than 5% penetration in sterile, but we see more and more traction not only from the big customers but also from the oral market in biosimilar environment.

Okay. Just real quick. In terms of the sort of peak contribution we can expect from Fishers and Latina, the old paradigm of EUR 1 or EUR 1 of CapEx is EUR 1 of revenues does that hold? And is that the right ballpark of what we should be thinking about in 2020, '29 and sort of like the incremental contribution from these. You're seeing some of it already?

Yes. Yes. It's -- the rule of tumble is when we talk about high value solutions we can estimate EUR 1 CapEx, EUR 1 revenue went fully ramped up. This is the case for the high-value solutions that is giving us confidence to have -- as I was saying before, a big room for expansion in the coming years in revenue and profitability. Important, we are matching customers' demand. Well, it's not only the CapEx. It's a fact that in investing in syringes, for example, we match the needs of our customers. We are doing the same for cartridges with multiyear visibility. So in High Value Solution, we believe, yes, we did a very big CapEx in the past, but we believe it has been the best way to deploy our capital after IPO.

Yes. Let's start with engineering and talk through that. you've been facing headwinds in that segment for a number of quarters now. You're working through it sort of it's a lot of blocking and tackling and identifying the issues and working through them. Can you give us an update on sort of the road map from here. You mentioned 31% decline in 1Q as expected. How does that progress through the year? When does engineering sort of get back on track and is no longer

The visibility we have today is similar to the one we had last year to deliver our guidance. So we are confident about our guidance. Our guidance today stays between EUR 130 million to EUR 140 million of third-party revenue driven by the backlog we have and the opportunities we are discussing with our key customers. The good news is that our key customers are still there. They appreciate a lot of our technology. Medium term, we see strong demand, both for visual expection machines and assembly and packaging lines mainly related to the self-administration. So the technology is there. Customers -- good customers are there. And the market demand as we can see it positively for the medium term. We are in this situation where we saw some slowdown in the decision-making of CapEx projects, probably driven by -- also by tariffs and some geopolitical tension. Talking with the peers is a quite common situation in this period of time. Nevertheless, we did -- we believe a good job in making the segment more efficient with a more efficient footprint, with more technology concentrated in Italy for visual inspection, glass forming and the second step of the process of the ready-to-use. In Denmark, we are keeping the packaging lines for drug delivery systems and devices in general. We have been able to reduce cost, improve our processes and we can see the first signal in our profitability expansion. Very important also, we have been able to deliver all the complex machines that were in delay, the -- And so we regain credibility with customers, and we are well positioned to restart our journey of growth.

Okay. And you talked about sort of rebuilding some of that funnel, some of the order and commercial execution. I imagine you have a very long lead time in this business. Are you starting to get visibility on 2027, trends you talk about this year, kind of thinking through of when will engineering and go back to historical trends or sort of it too early to project that or do you think you're on your way there?

It's a little bit early to project 2027 because it's a project business. So we have backlog for 2027, but we still have to fulfill the backlog. We are -- it's important to underline. We are recognizing our revenue on the percent of completion basis. So part of the orders we are winning will be converting to saving '26 and part in '27. So we are starting gaining more visibility on 2027, but it's a little bit early to talk about numbers. What I can tell you is that we see strong interest and good pipeline in visual special machines and assembly packaging lines.

And just in the last couple of minutes we have left. You touched on margin expansion and sort of the road map there a number of times, both from BDS and HBS, underlying demand and volumes, mix shift and Latina, Fishers coming online and then also getting past the engineering headwinds. Can you talk about margin trajectory this year? And then longer term, what that algorithm what that formula looks like?

No, I want journey we explained during Capital Markets Day, it remains intact. We see -- we have been able to increase adjusted EBITDA margin by 160 basis points last year, and our guidance for this year is a further expansion of 150 basis points. But this is the trajectory, I mean, when you put together the fact that biologics are gaining traction, GLP-1 is a durable tailwind. This is driving the increase of the share of our high-value products. I mentioned before Fishers and Latina, we're dragging. They are still dilutive in the combination And on the opposite, we plan that when fully ramp-up will be significantly accretive for the mix of the segment. So if you put this together with the fact that we need to slightly improve our engineering business, we are confident to do that. Our trajectory of growing margin expansion remaining intact. Our goal is to reach 30% of adjusted EBITDA at some point in 2027. So the trajectory is there, there can be some quarterly anticipation of delaying getting there, but we are very committed and confident to get there.

Any questions from the audience? All right. I'll throw in one last one. We're almost out of time. You talked about CapEx and free cash flow and the requirement, especially at a the heavy lifting has been done yet, but this typically is still a very CapEx-intensive industry and market. So what are your plans for cash use going forward and so some of those lines? .

Following the IPO, the peak was in 2023 with more than EUR 430 million of CapEx. We went down in '24 and 25. We see '26 between EUR 240 million to EUR 260 million of net CapEx. This is related to the execution in Fishers and Latina, but level of CapEx is going down in 2027. And our goal is to go back to our 10% CapEx on revenue to keep on growing high single-digit, low double digit. So the cash flow is coming. 2026, we are still between -- EUR 20 million positive after EUR 18 million positive free cash flow in 2025. We see significant improvement in cash flow by 2027 and beyond.

All right. Thank you so much. That's -- we're out of time. Thanks, everyone. Thank you, Marco.

Thank you very much. Thank you.