Stevanato Group Q2 2025 Earnings Report

Stevanato Group EPS Results

• Actual EPS: N/A
• Consensus EPS: €0.11
• Beat/Miss: N/A
• One Year Ago EPS: €0.09

Stevanato Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $302.83 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Stevanato Group Announcement Details

• Quarter: Q2 2025
• Date: 8/5/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 8:30AM ET

Stevanato Group (NYSE:STVN) engages in the design, production, and distribution of products and processes to provide integrated solutions for bio-pharma and healthcare industries in Europe, the Middle East, Africa, North America, South America, and the Asia Pacific. The company operates in two segments, Biopharmaceutical and Diagnostic Solutions; and Engineering. Its principal products include containment solutions, drug delivery systems, medical devices, diagnostic, analytical services, visual inspection machines, assembling and packaging machines, and glass forming machines. The company was founded in 1949 and is headquartered in Piombino Dese, Italy. Stevanato Group S.p.A. is a subsidiary of Stevanato Holding S.R.L.

Stevanato Group Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Revenue growth: Q2 sales rose 8% year-over-year to €280 million, driven by a 10% increase in the Biopharma & Diagnostic Solutions segment that offset a 2% decline in Engineering.
• Positive Sentiment: High value mix expansion: Premium solutions accounted for 42% of total revenue, led by strong demand for high-performance syringes, easy-fill cartridges, and vials amid easing destocking trends.
• Positive Sentiment: Margin improvement: Consolidated gross margin widened by 210 bps to 28.1%, operating profit margin climbed to 14.8%, and adjusted EBITDA margin increased to 23.2%, reflecting scale benefits and cost discipline.
• Positive Sentiment: Engineering turnaround: Management completed most legacy projects with a significant rise in customer site acceptance tests and is on track to finish remaining work by year-end, setting the stage for improved segment performance.
• Positive Sentiment: Capacity investments: €69.1 million in capex was deployed to expand high-value syringe and future cartridge production at Latina and Fishers, with full productivity slated by late 2028 to support long-term growth.

Presentation

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Stevanato's Second Quarter twenty twenty five Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions.

[Operator]

At this time, I would like to turn the conference over to Ms. Lisa Miles, Investor Relations. Please go ahead, madam.

[Lisa Miles, Chief Communications & Investor Relations Officer at Stevanato Group]

Good morning and thank you for joining us. With me today are Franco Stevanato, Chief Executive Officer and Marco De Lago, Chief Financial Officer. A presentation to accompany today's results is available on the Investor Relations page of our website under the Financial Results tab. As a reminder, some statements being made today are forward looking and based on current expectations. Actual results may differ materially due to risks outlined in Item three d Risk Factors of our most recent annual report on Form 20 F filed with the SEC.

[Lisa Miles, Chief Communications & Investor Relations Officer at Stevanato Group]

Please review the Safe Harbor statement included at the beginning of today's presentation and in our press release. The company undertakes no obligation to revise or update these forward looking statements except as required by law. Today's presentation may include non GAAP financial information. Management uses these measures internally to assess performance and believes they may be helpful for investors in evaluating the quality of our financial results, identifying trends in our performance, and providing meaningful period to period comparisons. For reconciliation of these non GAAP measures, please refer to the company's most recent earnings press release.

[Lisa Miles, Chief Communications & Investor Relations Officer at Stevanato Group]

And with that, I'll hand the call over to Franco Stevanato.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Thank you, Lisa, and thanks for joining us. Today, we will review our second quarter performance, share updates on our investment projects and discuss the current market environment. We delivered another solid quarter marked by top line growth, a higher mix of high value solutions and expanded margins. These results keep us on track to achieve our full year 2025 guidance and reflect the continued momentum of our strategic road map. In the 2025, revenue grew 8%, led by strong performance in our biopharmaceutical and diagnostic solutions segment, particularly in our core drug containment business.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Notably, this growth offset a 2% revenue decline in the Engineering segment as we continue to advance our business optimization plan. The solid performance in the BDS segment is underpinned by favorable secular tailwinds, especially the continued rise in biologics, which is fueling strong demand for our products. The expanding capacity in Latin American fishers is a direct response to market demand and our new facilities are already contributing to near term growth as we scale volumes and generate revenue from high value products. In the second quarter, high value solutions accounted for 42% of total revenue, driven primarily by growth in high value syringes and to a lesser extent, easy fill cartridges and easy fill vias. We are also seeing encouraging signs of ongoing stabilization in vial demand as the effects of destocking continue to ease.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Turning to the engineering segment. Second quarter revenue was largely in line with our expectations, but margins were lower due to a higher mix of revenue from legacy projects and the timing of new order intake. Two factors contributed to this. First, our top priority remains execution with dedicated resources focused on completing the remaining legacy projects. Second, several new orders that were forecast in the second quarter are now expected to be secured in the 2025.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

However, we are making meaningful operational progress of the initiative outlined in our business optimization plan. During the quarter, we completed the majority of these legacy projects and remain on track to finalize the remaining ones by the end of this year. One of the key performance indicators underscoring our operational improvements is customer site acceptance tests or SITs. This is the final validation step when a customer accepts the manufacturing line. For the 2025, our SATs significantly increased compared to last year.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

This is an important achievement for the team and confirms that our actions are delivering results. Over the last twelve months, we have streamlined processes and improved workflows across every phase from order intake to acceptance testing. We have also rebalanced internal resources to support the relocation of certain activities to Italy. Looking ahead, our Danmark operations will serve as an innovation hub, focused on more customized manufacturing lines for device assembly and packaging. In parallel, we are advancing our footprint optimization efforts.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

We are evaluating a second location in Bologna, Italy, where we already have operation and access to a strong pool of technical talent. Over the past year, we have been laser focused on execution. Now, we have initiatives underway to enhance our commercial strategy and better position the segment to capitalize on long term growth opportunities. Over the next five years, we see continued strong demand due to the favorable trends such as the increase in the self administration of medicine and the continued rise in biologics. We also believe that we are well positioned to benefit from investments and U.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

S. Onshore initiatives that were recently announced by several pharma and biotech customers. Let's turn to an update on our capital investment projects in Fisher and Latina, where we are increasing our capacity for high value syringes in the near term. In features, line installation and customer validation are ongoing and the site is expected to reach full productivity in late twenty twenty eight. In June, we hosted participants from the Parenteral Drug Association or PDI conference for Aturos Tervanto Group's advanced manufacturing capabilities.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

The event showcased our premium drug containment solutions, integrated device manufacturing and engineering after sales services. It was a valuable opportunity to strengthen our relationships and demonstrate our commitment to innovation and quality. In Latina, the team remains focused on scaling the current phase of commercial production for high value syringes. In parallel, we're restoring additional syringe lines, including ones that produce dual chamber products. Customer validations will continue into 2026 as planned.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

We are also preparing for the next phase of ready to use cartridges production. Our capital investments are helping us meet rising market demand for our core drug containment products amid the growth in biologics. In the 2025, biologics represented 39% of BDS revenue compared with 3525% in the same periods in fiscal twenty twenty four and 2023 respectively. While GLP-1s remain a strong long term tailwind, the wider biologics segment is also a key growth driver for our broader high value solutions portfolio. Let me share some examples.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

First, we are seeing high demand for our ALBA technology, the highest performing syringe platform in our portfolio. Customers in The U. S, Europe and APAC are using our ALBA platform for a range of mAbs based products that require minimal particle release. Those programs include ophthalmic application among others. Second, we have a robust pipeline of mAbs projects in the clinical phase for both novel application and biosimilars driving demand for our Nexa premium syringes.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Lastly, we see an increasing number of requests for specially coated vias that are suited for highly potent drugs. This includes antibody drug conjugates or ADCs that require more complex production processes and advanced technologies. We believe that the strength of our portfolio will put us in an optimal position to leverage the diverse set of opportunities ahead, particularly in biologics, to deliver long term sustainable growth. With that, I'll turn the call over to Marco.

[Marco Dal Lago, CFO at Stevanato Group]

Thanks, Franco. Before I begin, I'd like to clarify that all comparisons refer to the 2024 unless otherwise specified. Let's start on Page nine. In the 2025, revenue increased by 8% to $280,000,000 driven by 10% growth in the BDS segment, which offset the 2% decline in the Engineering segment. Foreign currency translation was a headwind.

[Marco Dal Lago, CFO at Stevanato Group]

And on a constant currency basis, revenue would have increased 10%. Revenue from high value solutions grew 13% in the second quarter to $116,800,000 representing 42% of total revenue. This was primarily driven by continuous strong demand for high value syringes as well as growth in both easy fill vials and cartridges. The strong performance in the BDS segment led to a two ten basis point increase in consolidated gross profit margin, reaching 28.1% in the 2025. This was mainly due to the expected financial improvements at our Latina and Fishers facilities as we scale our multiyear investment plan.

[Marco Dal Lago, CFO at Stevanato Group]

While both sites are currently margin dilutive, we will continue to gain operating leverage as volumes and revenue grow and the higher mix or more accretive high value solutions. These favorable trends were partially offset by lower gross profit contribution from the Engineering segment. In the 2025, operating profit margin increased to 14.8% and on an adjusted basis operating profit margin rose to 15.5%. This improvement was driven by an increase in gross profit and continued benefits from the cost management initiatives launched last year. Net profit totaled 29,700,000.0 with diluted earnings per share of $0.11 On an adjusted basis, net profit was $31,300,000 and adjusted diluted EPS were also $0.11 Adjusted EBITDA increased to $65,100,000 resulting in a two forty basis point improvement in the adjusted EBITDA margin of 23.2% for the 2025.

[Marco Dal Lago, CFO at Stevanato Group]

Moving to segment results on Page 10. In the 2025, revenue from the VDS segment grew 10% to 2 and 43,500,000.0 led by growth in High Value Solutions as well as other containment and delivery solutions. On a constant currency basis, segment revenue would have increased 12%. As Franco noted, we are seeing vial demand stabilize as the effects of destocking continue to ease. High Value Solutions grew 13% to 116,800,000.0 representing approximately 48% of segment revenue fueled by growth in high value syringes and to a lesser extent easy fill cartridges and easy fill vials.

[Marco Dal Lago, CFO at Stevanato Group]

Revenue from other containment and delivery solutions increased 6% to $126,700,000 driven by bulk syringes, cartridges and contract manufacturing activities. In the 2025, gross profit margin increased three fifty basis points to 31.2%. Margin expansion was driven by the financial improvements in Latina and Fishers as well as a higher mix of more accretive high value solutions. As a result, the operating profit margin for the BDS segment rose to 19.1, up from 14.5% in the same period last year. In the 2025, revenue from the Engineering segment decreased 2% to $36,500,000 This was driven by lower revenue in our glass conversion business, partially offset by growth in the device assembly and packaging business.

[Marco Dal Lago, CFO at Stevanato Group]

The segment's gross profit margin declined to 6.6% resulting from a higher level of revenue from legacy projects and the timing of new work. This was due to a shift in new orders that were initially forecasted for the second quarter and are now expected to be secured in the 2025. As a result, the operating profit margin was negative 0.8%. Please turn to the next slide for an overview of the balance sheet and cash flow. As of 06/30/2025, the company had cash and cash equivalents of $94,200,000 and net debt of $312,400,000 In July, we announced $200,000,000 financing from three of our banking partners.

[Marco Dal Lago, CFO at Stevanato Group]

The funds will support the expansion of syringe production and future capacity for ready to use cartridges at our Latina facility as well as syringe production and device contract manufacturing in Fissures. For the 2025, capital expenditures totaled $69,100,000 Net cash from operating activities increased to 44,900,000.0 Cash used for the purchase of property, plant and equipment and intangible assets totaled EUR60.3 million for the 2025. The combination of increased operating cash flow and lower CapEx drove to a significant year over year improvement in free cash flow. This resulted in a negative free cash flow of EUR 13,000,000 for the 2025 compared with negative $46,100,000 in the same period last year. We believe we have adequate liquidity to fund our strategic priorities through a combination of cash on hand, cash generated from operations, available credit lines and our ability to access additional debt or equity financing.

[Marco Dal Lago, CFO at Stevanato Group]

Please turn to the next slide for guidance. We are reiterating our fiscal twenty twenty five guidance and still expect revenue in the range of 1,160,000,000 to €1,190,000,000 adjusted EBITDA between 2 and €88,500,000 and 301,800,000.0 and adjusted diluted EPS between $0.50 and $0.54 We have updated certain inputs in our guidance, including the following. The BDS segment is now expected to grow high single digits and the Engineering segment is now expected to decrease by low double digits compared to fiscal twenty twenty four, an increase in the mix of high value solutions to 40% to 42% of total revenue, up from 39% to 41% in our prior guide. For foreign currency, we now assume a headwind of approximately 12,000,000 to €15,000,000 on the top line. We assume a euro dollar rate between $1.13 to $1.17 for the 2025.

[Marco Dal Lago, CFO at Stevanato Group]

The headwind is offset by growth and fully absorbed in the model. In addition, our hedging strategies have helped to limit our exposure. An updated tariff rate for imported goods from the European Union to The U. S. Of 15% compared with our prior assumption of 10%.

[Marco Dal Lago, CFO at Stevanato Group]

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

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Thank you, Marco. With the first half of the year behind us, we are seeing sustained momentum driven by healthy market demand, which puts us squarely on the path to achieve our full year guidance. We advance our multiyear investment optimization plans, we remain focused on disciplined execution, industry leading innovation and continue to meet the evolving needs of our customers. Together, these priorities position us well for long term profitable growth. We operate in dynamic high growth markets with capital investments strategically aligned to meet demand driven needs.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

We have an established presence and long track record with a major biotech and pharma players, including the top 25 global pharma customers. These customers have a rich pipeline of biologic injectables in development and we remain a trusted partner to support their effort in bringing new groundbreaking treatments to patients. This dovetails with powerful secular trends such as aging population, pharmaceutical innovation and the shift towards self administration therapies. These trends align closely with our core capabilities and position us well for long term success. Looking ahead, believe the need for high performance truck containment, coupled with the value of a fully integrated platform, will support a sustainable revenue growth and drive meaningful margin expansion.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Backed by strong business fundamentals and a disciplined financial strategy, we have the flexibility to invest in growth while creating a long term value for our shareholders. Operator, we are ready for questions. Thank you.

[Operator]

Thank you, sir. This is the Chorus Call conference operator. We will now begin the question and answer session. You. The first question comes from Matt Larew of William Blair.

[Matt Larew, Research Analyst - Healthcare at William Blair]

Hi, good morning and thanks for taking my question. On engineering, sounds like you're getting close to wrapping up some of the legacy projects that were hindering your ability to take on your work. But now you referenced some delays in new orders coming in. So just curious to me, are those delays in any way related to customer decision making related to tariffs? Are they purely timing?

[Matt Larew, Research Analyst - Healthcare at William Blair]

Or is this sort of an extended sales cycle issue? That's part one. And then the second part would be, I think this the new guidance requires a high teens decline in the back half of the year for engineering. But, Franco, you obviously alluded to a number of strong tailwinds in the medium term vis a vis reshoring and investments in The US. So to the extent we do have a high teens decline in engineering in the back half of the year, when does that reverse, And how do we kind of bridge to the strong growth environment you alluded to?

[Marco Dal Lago, CFO at Stevanato Group]

Thanks, Matt. Marco speaking. Starting from second quarter, timing of new orders. So that's basically from the second quarter to the second half of the year. We haven't lost important negotiation.

[Marco Dal Lago, CFO at Stevanato Group]

It's just a matter of decision making related to CapEx on our customer side. This is a project based business, so it's not unusual for order flow and timing to fluctuate from quarter to quarter. And about the guidance reflecting this timing, let's say, postponement, we review our guidance guiding now to a low double digit decline compared to last year that is reflecting the timing difference of new orders. Nevertheless, as mentioned, we more than offset the difference with the stronger market in BDS segment that offset also the currency headwinds.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Matt, Franco speaking. If you can add a little bit more color from what is related to the market. Biologic market is heavily investing in new technology, thanks to the rich pipeline that they have, they are launching to the market. So I can confirm that demand outside is very strong. The focus in the last three quarters for Stefano was just to deliver and to succeed with the SATs to our bigger clients, in particular, for what are related some legacy program.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Today, we have we were successfully we are able to deliver this line. And these are inside of bigger agreement with our customer that will be some additional repetitive orders. So it's just a timing effect. Today, once we are going to deliver this line, there will be additional lines that we're going to assemble and deliver to our clients in the next twelve to eighteen months.

[Matt Larew, Research Analyst - Healthcare at William Blair]

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

[Marco Dal Lago, CFO at Stevanato Group]

Yes. I'll start with the numbers, then Franco will provide more color about the market. We went up about 3% compared with the same period last year in bios. But the orders in stake is very strong, mean, it's double digit growth compared to same period last year. So we reiterate our confidence in mid- to high single digit growth in Vials for 2025 after a decline of 35% last year.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

And Matt, if you remember in the last two, three quarters, we showed that we are starting to see gradual recovery, gradual improvement in the buyer market, in particular, bulk and also in the easy field. So today, we have some good indicator in Stanto Group. So our order intake is starting order book is starting to improve quarter after quarters. We are starting to see also some positive big orders, in particular, United States for easy fill buyers. And also, we are confident that our idea that without the 2025 that we move without a sort of normalization is still on track.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

So we are confident of this gradual recovery on the buyer market.

[Matt Larew, Research Analyst - Healthcare at William Blair]

Great. Thank you.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

You're welcome.

[Operator]

The next question is from Michael Ryskin of Bank of America.

[Analyst]

Hey, this is Amantika on for Mike. Thanks for taking my question. I just wanted to ask on BDS. The guide raise is encouraging, but wanted to see if you were seeing any pull forward from customers due to tariffs?

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

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

[Marco Dal Lago, CFO at Stevanato Group]

Yes. About tariffs, we had positive conversations with our customers. Basically, we are reiterating our guidance that in May, we assume in our guidance about €4,500,000 seen at the operating profit level in spite of the increased tariffs from the European Union to U. S, we have been able to offset this incremental tariffs, thanks to conversation with our customers and the fact that we are leveraging more and more our global footprint.

[Lisa Miles, Chief Communications & Investor Relations Officer at Stevanato Group]

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

[Analyst]

All right, great. Thank you so much. And then if I may ask, like a few weeks ago, you announced a $200,000,000 bridge credit with shares and Latina sites. Are you able to give us a little bit more color on that agreement and what you're looking to use those funds for?

[Marco Dal Lago, CFO at Stevanato Group]

Yes. First of all, we have very good relationship with our banking partners. The purpose of the financing is to expand our capacity predominantly in Latina with RTU cartridges and syringes, but also in fishes with syringes, vials and drug delivery systems. It's totally consistent with our strategy of expansion. And beside that, we are also planning to reimburse some financing in 2025 and 2026, some legacy financing.

[Marco Dal Lago, CFO at Stevanato Group]

So it's we are just securing advance the needs for the future months and years.

[Analyst]

All right, great. Thank you so much.

[Operator]

The next question is from David Windley of Jefferies.

[Dave Windley, Managing Director at Jefferies LLC]

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

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Yes. David, Franco speaking. So first of all, we don't provide a detailed breakdown around the GLP-1s. We usually, we don't provide the number around a single category. GLP-1s, we put under the umbrella of Biologics in our BDS segment that move from 2022 to 2025 from 19% of the revenue of the BDS segment up to more than 39% in the 2025.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

So for sure, GLP-one is it will be a solid long term tailwinds for Sternato Group because we are deeply involved through our big clients, also biosimilar through all practically our product portfolio from syringes, syringes by pass, cartridges, say to fill, engineering line and also from CMO in terms of DDS. But beside this, what I would like to underline that the biologic industry in general, in particular, about top 25 clients have a rich pipeline today. And most of this pipeline, they are going to use injectable product, even more what we call self administration. So today in Stefano, we have many programs around ALBA technology for what is related to certain high potent drugs that from certain molecule that there are very high attention on the particle release. We have many program around cartridges ready to fill from three to five to 10 ml when there is it's connected also delta injectors.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

And also, we have many program around the vial ready to fill. So all overall, we are able to continue to grow together with our big Bayer customers that involves the amount of group many years ago on standard Bayer. Today, they are continues to evolve. And thanks to their self administration requirement, they are going to engage the Stemanat in the full portfolio. So we are quite happy about this.

[Dave Windley, Managing Director at Jefferies LLC]

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

[Marco Dal Lago, CFO at Stevanato Group]

Thanks for the question. Dave, Marco speaking. First of all, we are happy about the first half of the year. In the second quarter, we reached 42% on total revenues in High Value Solutions. Main driver in the first half of the year has been high performance syringes, particularly Nexa.

[Marco Dal Lago, CFO at Stevanato Group]

Nevertheless, we see improvements in Easyfield Vials, as mentioned in the commentary, in easy field cartridges and also we can see very good opportunities in ALBA. So it's both a growth of volumes, but also we are happy about the mix.

[Dave Windley, Managing Director at Jefferies LLC]

Got it. Thank you.

[Operator]

The next question is from Patrick Donnelly of Citi. Hey

[Patrick Donnelly, Managing Director at Citi]

guys. Thank you for taking the questions. Maybe one on the tariff side. It sounds like you guys are absorbing the new rates entirely in the guide. Can you just talk through the levers?

[Patrick Donnelly, Managing Director at Citi]

Is that primarily pricing? Are you shifting more capacity to Fisher's? And I guess on that point, where are we with Fisher's in terms of the capacity and how you're feeling there?

[Marco Dal Lago, CFO at Stevanato Group]

We have different factors helping us to absorb the incremental 5%. We had positive conversation with customers that most of the time are passing change in the income terms. So it's not impacting our cost and the customer is taking care of the custom duties. Sometimes we had the opportunity to increase the price after absorbing the cost. And in this case, we are guiding a tailwind of about €2,500,000 in our guidance that are a little bit dilutive, that is increasing our top line.

[Marco Dal Lago, CFO at Stevanato Group]

And finally, probably most important, we are leveraging our global footprint, trying to optimize the logistic in agreement with our customers. Yes.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

And Patrick, Franco speaking. On the top of what Marco already shared with you that we are practically mitigated this target through rescheduling to our 13 plants production to our big clients and to pass some surcharge to our customer. What I can add that the Fisher plants in the short term is focused on do audit and validation with existing program that we have with our big U. S. Clients.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

We cannot have particular benefit in 2025 from the future plans because they have already a big program capacity with already existing agreement with our customers. It's also true that in the medium term, we continue to benefit a lot with this greenfield plants, both from what are related to our easy field product, also our device program. Even more, we are starting to see more and more interest from our international clients to further increase the opportunity in these plants.

[Patrick Donnelly, Managing Director at Citi]

Okay. That's helpful. And then Marco, maybe one for you, just in terms of the guidance, if you could just help us out on I think about 3Q or 4Q, whether it's revenue, EBITDA, earnings, would be helpful just to talk through the second half split there. Thank you, guys.

[Marco Dal Lago, CFO at Stevanato Group]

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

[Patrick Donnelly, Managing Director at Citi]

Yes.

[Patrick Donnelly, Managing Director at Citi]

Just asking about the second half split between 3Q, 4Q on revenue and earnings, if you could help us out. Thank you.

[Marco Dal Lago, CFO at Stevanato Group]

Yes, sure. Basically, we provide colors about segments. I think that is clear. We expect in the third quarter a mid single digit growth compared with the same period last year and similarly in Q4 a mid single digit growth. So we've seen the second half a mid single digit to match our guidance both in Q3 and Q4.

[Marco Dal Lago, CFO at Stevanato Group]

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

[Patrick Donnelly, Managing Director at Citi]

Yes. Yes. Thank you.

[Operator]

The next question is from Larry Solow of CJS Securities.

[Larry Solow, Partner & Managing director - Equity Analyst at CJS Securities]

Great. Good afternoon. Could you just follow-up on the Fisher's and Latina question? Can you just give us a little more color? Just I know you mentioned they're clearly still margin dilutive, but I know Latina is profitable now.

[Larry Solow, Partner & Managing director - Equity Analyst at CJS Securities]

Can you just kind of give us an update on progress there? And as Fisher's, I assume it is profitable today, I know less it's margin dilutive, but still profitable, is that correct?

[Marco Dal Lago, CFO at Stevanato Group]

We start the commercial production in Latina in Q4 twenty twenty three and three quarters after in Fisher. So today, Latina is positive in term of a gross profit. Fisher is not yet. Anyway, we can see improvement quarter after quarter. Overall, the margin of the two sides is still dilutive compared with the average of the company.

[Marco Dal Lago, CFO at Stevanato Group]

It means that for the future, have further opportunity to scale up. And since we are producing and selling high value products there, we expect the margin improvements in the coming quarters. Correct.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

In fact, if I can add a little bit more color from the market. In Latina, we are continuing to scaling up commercial production, in particular for what is related to syringes, Nexa syringes, we also bypass the syringes. We also we are preparing the plants in order to build the capacity for easy fill cartridges and the program is to launch at the 2026, 2027, this high volume production for cartridges ready to fill. All these elements will help to boost the revenues of the Renato Group for high value product from these plants. In parallel, from the plants in Fisher, we are continuing the installation and validation of syringes technologies.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

And on parallel, we are building a big department that will be able to host production from drug delivery system for one S. Client. So these two greenfield plants, it will be an active contributor to revenue marginality in the next years.

[Larry Solow, Partner & Managing director - Equity Analyst at CJS Securities]

Got you. Great. And if I could just switch gears to engineering real fast. It sounds like most of the stuff is just more growing pains and timing. As we look out, maybe not in early twenty twenty six, as you look at maybe by 2027, 2028, would you expect margins to recover back and maybe be even higher than they were before you began these strategic initiatives in that segment? Thanks.

[Marco Dal Lago, CFO at Stevanato Group]

We are very confident about that. We described the problem we faced that we are now fixing with the delivery of the legacy projects, as Franco was mentioning. Generally speaking, we expect to go back to the profitability we had in twenty twenty two and twenty twenty three. So the customers are still appreciating our technology and our ability to deliver customized projects.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Yes. In fact, if I can add a little bit more color, in the last three quarters, we focused our organization through some optimization plan program, in particular from the plants that we have in Denmark that is specialized on the production for inspection machine, assembling technology for sophisticated devices. Also in Italy, we are starting to review our footprint in order to make some center of excellence able to produce some inspection line. So are all products that are well absorbed by our biologic customer in the future. So the combination of this increase of footprint productivity and the strong demand outside is give us a good confidence that we can have a good growth on the engineering and also improving our margins.

[Larry Solow, Partner & Managing director - Equity Analyst at CJS Securities]

Great. I appreciate that color. Thank you.

[Operator]

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

[Paul Knight, Managing Director at KeyBanc Capital Markets]

Hi, good morning. On the BDS segment, High Value Solutions grew 13%, other containment grew 6%. What would be a normal other containment growth rate in your opinion? Should it be high single digits or what should that 6% be after destocking is over?

[Marco Dal Lago, CFO at Stevanato Group]

Hi, Paul. Markus speaking. It's more the normalized, let's say, growth in other container delivery solution is more we've seen the low to mid single digit as per our Capital Markets Day. We expect after the recovery of the bulk buyers growth in that range. We are, as you know, more focused with our investments in High Value Solutions.

[Marco Dal Lago, CFO at Stevanato Group]

So this is where we are growing and see the growth for the coming years.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Yes. In fact, Paul, again, I would like to give some color from market point of view. We serve the top 25 global key customers. Also in parallel, we serve several 100 clients worldwide. But the goal is, Tevanato, in the medium, long term, to further focus Tevanato on high value product.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

In fact, all the investment that we are doing are moving more and more in the high value solution. It's strategically important to keep a market on also bulk buyer or other non high value product. But the big goal in the medium term for us is to invest and to focus on other market.

[Paul Knight, Managing Director at KeyBanc Capital Markets]

Then the question I have on engineering is you cited lower sales from glass converting. Does your own internal need for equipment detract from engineering growth? And how quickly can you add capacity in engineering?

[Marco Dal Lago, CFO at Stevanato Group]

So in our comments, we focus on third parties revenue. As you know, Paul, engineering glass converting machine is an important piece of our integration, especially features in Latina, also in ready to use cartridges. So it's but when we comment revenue growth, it's only on third parties. Yes.

[Paul Knight, Managing Director at KeyBanc Capital Markets]

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

[Marco Dal Lago, CFO at Stevanato Group]

Exactly. We are going on in Latina and Fishers, where our technology is needed both in bulk and in easy fill.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Today, Paul, our engineering division, the glass forming third party is an important market, is more a niche, where the engineering division's focus today is to serve our big pharma, biologic customers, in particular for what is related to inspection machine and sophisticated technology of assembly from auto injector is where the market is growing. Also to remember that the power of the engineering division for Stefano have two objectives. One is to serve the biologic market, but the second is to make the internal group of the BDS segment in particular competitive. Today, our engineering division is squarely focused to develop this technology for cartridges, say, to fill, particular technology for bypass and also the ALBA technologies where we want really to build some competitive advantages. The BDS segment is where the engineering will play a critical role for the group internally.

[Paul Knight, Managing Director at KeyBanc Capital Markets]

Okay. Thank you.

[Operator]

The next question is from Doug Schenkel of Wolfe Research.

[Doug Schenkel, MD - Life Science Tools & Diagnostics at Wolfe Research LLC]

Hi, thank you for taking my let me start with tariffs. So I'm just curious from a tariff mitigation standpoint, have you been able to pass along price? And what other mitigation efforts are underway? And how are those reflected in guidance?

[Marco Dal Lago, CFO at Stevanato Group]

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

[Doug Schenkel, MD - Life Science Tools & Diagnostics at Wolfe Research LLC]

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

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

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

[Doug Schenkel, MD - Life Science Tools & Diagnostics at Wolfe Research LLC]

Okay. And one more on margins. Just from a guidance standpoint, I mean, I guess it depends on where you come out in terms of revenue, whether it's the high end or the low end of the range. But I just want to make sure I'm doing the math correctly. At the midpoint of the range a revenue standpoint is then you go down to the operating margin line to get 150 basis points of operating margin expansion, your guidance, do you essentially keep operating spends about flat year over year second half of this year versus second half of last year?

[Marco Dal Lago, CFO at Stevanato Group]

Yes. The margin expansion is driven, as mentioned, by High Value Products. We raised our guidance from 39% to 41% to 40% to 42%. So we are more confident. We are very well covered in our backlog for High Value products.

[Marco Dal Lago, CFO at Stevanato Group]

Moreover, we recalculated the depreciation after six months. We have a you probably noticed we have a large amount of assets under construction. So we played a little bit conservatively at the beginning of the year. Now we can estimate the lower level of depreciation. So this is driving the increase in operating profit.

[Marco Dal Lago, CFO at Stevanato Group]

Obviously, depreciation are not impacting our EBITDA and adjusted EBITDA, and we are reiterating our guidance for EBITDA for the year.

[Doug Schenkel, MD - Life Science Tools & Diagnostics at Wolfe Research LLC]

Okay. Very last one, another modeling question. Tax rate, so it does look like you bumped up second half tax rate assumptions to around 27%. What drove that? And is that the new tax rate moving forward?

[Marco Dal Lago, CFO at Stevanato Group]

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

[Doug Schenkel, MD - Life Science Tools & Diagnostics at Wolfe Research LLC]

Okay. Thank you very much.

[Operator]

The next question is from Matt Ettosch of Stephens Incorporated.

[Mac Etoch, Analyst - Healthcare at Stephens Inc]

Hey, good morning. Just a few for me. But you mentioned in your prepared remarks just that you're well positioned to benefit from some onshoring announcements that have been announced recently. I'm just curious to gauge where you all think you all can benefit the most and if you're seeing any incremental interest today in Fisher's or within your engineering offerings?

[Lisa Miles, Chief Communications & Investor Relations Officer at Stevanato Group]

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

[Mac Etoch, Analyst - Healthcare at Stephens Inc]

the Yeah. Apologies. Can you hear me all right?

[Lisa Miles, Chief Communications & Investor Relations Officer at Stevanato Group]

Yes.

[Mac Etoch, Analyst - Healthcare at Stephens Inc]

Awesome. Yes, I was just curious, you mentioned in your prepared remarks that you're well positioned to benefit from the ongoing announcements that have been announced recently. So my question is just, are you seeing any incremental interest today within Fisher's or your engineering offerings? And from your perspective, where do you think you're most well positioned to benefit?

[Lisa Miles, Chief Communications & Investor Relations Officer at Stevanato Group]

Okay. So just to confirm, it's related to Franco's comments on the investments that we're seeing from customers related to those manufacturing investments in The United States and those U. S. Onshoring initiatives and the demand that we anticipate from that.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Yes, correct. Yes. We starting from, let's say, March March of this year, we are starting to see a change in on the strategy, in particular, our big international clients, also some biosimilars to review their installation of capacity in United States. So thanks to this change of strategy, well, Stefano is looking to have some benefit. First, from engineering point of view, this will give us the opportunity to sell more technology, particularly around inspection machine and also around assembly technology.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Even more through our greenfield plants and features, automatically, we can better offer a sophisticated supply chain for United States that in terms of easy field product, in particular, and devices, we can really build dedicated capacity for The U. S. Utilization. And in fact, we are happy for this. We are probably working with our customers on this direction.

[Mac Etoch, Analyst - Healthcare at Stephens Inc]

Appreciate it, Biller.

[Operator]

The next question is from Stephen Moelis of BNP Paribas, Exane.

[Curtis Moiles, Equity Research Analyst - Healthcare at BNP Paribas]

Thank you. I think that was Curtis Moelis. Thanks for taking my questions. So I just have a couple, please. First, on the engineering segment.

[Curtis Moiles, Equity Research Analyst - Healthcare at BNP Paribas]

I wanted to see if maybe you could give a little bit more color about how we can think about it in 2026, especially with some of these projects being pushed out, I guess. Are you expecting kind of a rebound in growth in margins pretty quickly in the Or is it going to be maybe more back end loaded? I don't know how much precision you can give there. And then also on that potentially expanding the footprint in Italy, do you have maybe a timeline in mind for that?

[Lisa Miles, Chief Communications & Investor Relations Officer at Stevanato Group]

So just to confirm your questions, engineering color on 2026, rebound on margins and then question related to the activities we're moving to Italy.

[Marco Dal Lago, CFO at Stevanato Group]

So about 2026 is we will provide the guidance as usual in a couple of quarters. So it's a little bit early to go through the segments and the evolution of each segment for 2026. Nevertheless, we mentioned before that the trajectory we expect positive going out from the legacy projects and the problems we face related to the supply chain and the workload we mentioned during the pandemic. But it's a little bit early to provide color about 2026.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

And regarding the footprint strategy, we already started in the second part of last year to optimize our footprint. In the last two, three years, in particular, the plants in Denmark increased a lot because we received many orders from inspection machine, standard assembly technology, even more what we call this complex new prototype of high speed technology for devices. So through what we call our optimization plan, we are building three different size that are becoming center of excellence. Denmark, it became center of excellence for assembly technology and the cap for inspections. Italy, it will be center of excellence for glass forming and in inspection.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

And then we have the plants in Bologna that we are using in order to make what we call customized prototype for new particular technology. In this way, we have three sites, each one specialized for one product line, and they can serve as a backup if in certain quarter or period, there will be some particular orders. This is the way that we are going to review our footprint strategy in our engineering divisions.

[Curtis Moiles, Equity Research Analyst - Healthcare at BNP Paribas]

Okay. That's helpful. And if I could just squeeze in one more, too. I wanted to touch on vial order patterns that you're seeing recently. I mean it sounds like it's improving there, but can you talk to maybe like lead times, are they back to pre COVID norms?

[Curtis Moiles, Equity Research Analyst - Healthcare at BNP Paribas]

And are you seeing kind of customer inventories at a normalized level? And finally, where is kind of utilization sitting for these vial manufacturing lines?

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

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

[Curtis Moiles, Equity Research Analyst - Healthcare at BNP Paribas]

Great. Thank you.

[Operator]

The next question is from Yuko Oku of Morgan Stanley.

[Yuko Oku, Equity Research Associate at Morgan Stanley]

Understanding that your offering and services address a critical aspect of drug manufacturing, given the uncertainty that biopharma industry is facing today, are you seeing any pricing pressure broadly in the industry as pharma companies try to get best value for the cost?

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

So today, what do we see? The big priority of our big clients are secure the supply chain. Today, if you look, in particular, the biologic market, they are starting with in the large time in advance to secure the capacity, both in particular Europe, United States. Like an example, on syringes, they want to secure their capacity in order to be able to fulfill their demand for the existing commercial program, but also in particular for the pipeline that they are launching in Phase II, Phase III. The same is for the cartridges to fill.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Also we are starting to see more and more that due to a next one requirement, many clients are moving with the new, what we call flexible technology. Practically, they are moving from using bulk glass container to easy fill. So it's rare that for high value product, we are under pressure about prices. It's more common that the market is looking for well established player with a global footprint, one superior quality. And let me do some, I'll say, sales marketing.

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

Our Nexa technology in this moment is really the right answer to the superior quality requirement for this sophisticated biologic product.

[Yuko Oku, Equity Research Associate at Morgan Stanley]

Thank you for the color. And then I just wanted to ask a question on margin. With good progress on the legacy projects from Denmark in the engineering segment, how should we think about cadence of engineering margin improvements in 3Q? Should we anticipate a stepwise improvement for the engineering segment now that majority of those projects are complete or more gradual improvement over remainder of the year?

[Marco Dal Lago, CFO at Stevanato Group]

In our model, we expect sequential improvement in Q3 and Q4. Nevertheless, this is based on the assumption to win as soon the contract shift from the second quarter to the second half of the year. So our model is a sequential improvement in Q3 and Q4. On one side, we are exiting from the legacy low margin projects. We are we have very positive negotiation with our customer.

[Marco Dal Lago, CFO at Stevanato Group]

We are close to finalizing contracts. So this is our model today of a sequential improvement.

[Yuko Oku, Equity Research Associate at Morgan Stanley]

Thank you.

[Operator]

The last question is from Dan Leonard of UBS.

[Dan Leonard, MD & Research Analyst at UBS Group]

Thanks for the time. First off, I was hoping you could talk about the impact of GLP-one compounding on the demand for vials and whether that's even a relevant demand driver?

[Marco Dal Lago, CFO at Stevanato Group]

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

[Dan Leonard, MD & Research Analyst at UBS Group]

Understood. And a tariff related follow-up. How much of your U. S. Demand is supplied from The U.

[Dan Leonard, MD & Research Analyst at UBS Group]

S. At this point? And where does that go over the near term?

[Franco Stevanato, Executive Chairman & CEO at Stevanato Group]

So up to now, the greenfield plants in future is at the beginning. So it's really a small portion of our revenue that we sell from our U. S. Plants. Quarter after quarter, say, year after year, the goal is that this planting feature, it will be the plant that is going to serve The U. S. Market.

[Dan Leonard, MD & Research Analyst at UBS Group]

Thank you.

[Operator]

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

Participants

Executives

• Lisa Miles, Chief Communications & Investor Relations Officer
• Franco Stevanato, Executive Chairman & CEO
• Marco Dal Lago, CFO

Analysts

• Matt Larew, Research Analyst - Healthcare at William Blair
• Analyst
• Dave Windley, Managing Director at Jefferies LLC
• Patrick Donnelly, Managing Director at Citi
• Larry Solow, Partner & Managing director - Equity Analyst at CJS Securities
• Paul Knight, Managing Director at KeyBanc Capital Markets
• Doug Schenkel, MD - Life Science Tools & Diagnostics at Wolfe Research LLC
• Mac Etoch, Analyst - Healthcare at Stephens Inc
• Curtis Moiles, Equity Research Analyst - Healthcare at BNP Paribas
• Yuko Oku, Equity Research Associate at Morgan Stanley
• Dan Leonard, MD & Research Analyst at UBS Group