Good afternoon. Welcome, and thank you for joining the Stevanato Group First Quarter 2025 Results Conference Call. I would like to turn the conference over to Ms. Lisa Miles, Senior Vice President, Investor Relations. Please go ahead, madam.

Good morning, and thank you for joining us. With me today are Franco Stevanato, Chief Executive Officer; and Marco Dal 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 3D, Risk Factors of our most recent annual report on Form 20-F filed with the SEC. 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 believe 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 a reconciliation of these non-GAAP measures, please refer to the company's most recent earnings press release. And with that, I'll hand the call over to Franco Stevanato for his opening remarks.

Thank you, Lisa, and thanks for joining us. Today, we'll review our first quarter performance, share an update on our investment projects and discuss the current environment. We started fiscal 2025 with strong momentum in the first quarter, highlighted by 9% revenue growth and a step-up in gross profit margin compared to last year. Our first quarter financial results exceeded our expectations, driven by strong operational delivery in the Biopharmaceutical and Diagnostics Solutions Segment. This helped offset the anticipated soft performance in the Engineering Segment, as we continue to execute our business optimization plan. The solid performance in the BDS Segment was driven by the expected improvements at our Latina and Fishers facilities, as our capacity expansion projects started to scale volumes and revenue, and a favorable mix of high-value solutions including a modest recovery in EZ-fill vials. Revenue from high-value solutions accounted for 43% of the total revenue in the first quarter of 2025, as we continue to expand capacity for high-value syringes to meet robust demand. We also see ongoing signs of stabilization in vial demand as the effects of destocking gradually subside. As anticipated, the revenue and margin decline in the Engineering Segment were primarily related to the legacy projects in Denmark. This unfavorably impacted the portfolio mix in the first quarter. As part of our optimization plan, we prioritized the execution of these projects and have made significant operational progress. We remain on track to complete all of them in 2025 with the majority expected to be completed midyear. While these improvements may not be fully reflected in our financial results, they led to meaningful gains across key operational performance indicators. This reinforces our confidence that we are on the right path. For example, in the first quarter, acceptance testing rates continue to improve for both final factory acceptance and site acceptance testing. This reflects the tangible progress we are making in bringing these projects to completion and strengthening the segment's operational delivery. Looking ahead, we see strong demand for our Engineering manufacturing lines, where long-term growth is underpinned by favorable secular trends. For example, rising patient adoption of drug delivery devices is fueling demand for complex device assembly and packaging lines. We are supporting a new wave of customers as they rapidly expand their device programs, helping customers deliver therapies and treatments to patients safely and efficiently. Let's turn to an update on our capital investment projects in Fishers and Latina. In the first quarter, we saw continued financial improvement in margins from our expansion projects as we begin to scale volumes, utilization and revenue. Both facilities, we are ramping up syringes to satisfy strong market demand. Our hub in Fishers brings together our drug containment solutions and device manufacturing capabilities to offer customers an integrated offering with localized production in the U.S. I recently returned from Fishers, where activities are in high gear. Today, we are in the early phases of scaling commercial syringe production. In parallel, we are on track with ongoing installations of additional manufacturing line. We have a full schedule of customer validation and audit activities booked for the second quarter as more capacity comes online. We also started construction on our device manufacturing area to support customer device programs for biologic treatments. As a reminder, we keep a selective and strategic approach to contract manufacturing, and these projects integrate our glass products and most of the time, our Engineering technology for assembly. This demonstrates the value customers see in our diversified and complementary portfolio of integrated solutions. In Latina, we are scaling commercial production for high-value syringes and manufacturing line installations are ongoing. Customer validation activities will continue into 2026 as planned. We are also preparing for the next phase of ready-to-use cartridges production with commercial production still expected to launch at the end of 2026. Before I hand the call over to Marco, I'd like to briefly share some thoughts on global trade and tariffs. We have a task force that's practically working to mitigate the potential exposure to tariffs through a combination of actions, including customer surcharges, supply chain, procurement and other initiatives. Based on recent discussions with customers, alongside thorough analysis and the broader industry commentary, we expect that most of the tariff-related costs will be absorbed by customers. As a reminder, we experienced a similar situation when gas prices spiked a few years ago. These cost increases were passed through. That said, we are continuing to leverage our global manufacturing network to support localized production. As we ramp up operations in Fishers, this will further support our customers with a robust in-market supply chain as more pharma and biotech companies increase their manufacturing footprints in the U.S. We do not expect that tariffs will affect our competitive positioning. On the contrary, we believe our ongoing investment in the U.S. will further reinforce our position in this important market. With that, I'll turn the call over to Marco.

Thanks, Franco. Before I begin, I'd like to clarify that all comparisons refer to the first quarter of 2024, unless otherwise specified. Let's start on Page 9. In the first quarter of 2025, revenue increased by 9% or 8% on a constant currency basis to EUR 256.6 million. This was driven by 11% growth in the BDS segment, which offset a 4% revenue decline in the Engineering segment. Revenue from high-value solutions grew 25% in the first quarter to EUR 110.3 million and accounted for 43% of total revenue. This was driven by continued strong demand in high-value syringes, increasing capacity in Latina and Fishers, and the partial recovery in EZ-fill vials as destocking subsides. The strong performance in the BDS segment led to an 80 basis point increase in consolidated gross profit margin of 27.2% in the first quarter of 2025. This was driven by the expected improvements at our Latina and Fishers facilities as we scale our multiyear investment plan, including device contract manufacturing activities in Fishers. While the two sites remain margin dilutive, we are gaining operating leverage as we scale volumes, utilization, and revenue. Second, a higher mix of more accretive high-value solutions, including a modest improvement in EZ-fill vials. These favorable trends were offset by the expected lower gross profit from the Engineering segment. In the first quarter of 2025, operating profit margin increased 280 basis points to 13.5%. And on an adjusted basis, operating profit margin was 14.3%. This was driven by an increase in gross profit and continued benefits from the initiative launched last year to curtail costs without compromising future growth. For the first quarter of 2025, net profit totaled EUR 26.5 million and diluted earnings per share were EUR 0.10. On an adjusted basis, net profit was EUR 28.1 million and adjusted diluted EPS were also EUR 0.10. Adjusted EBITDA was EUR 57.4 million and adjusted EBITDA margin increased 100 basis points to 22.4%. Moving to segment results on Page 10. In the first quarter of 2025, revenue from the BDS segment increased 11% to EUR 220.8 million on both a reported and constant currency basis, driven by strong growth in high-value syringes and to a lesser extent, other product categories. During the quarter, we also saw continued stabilization in vial demand as the effects of destocking began to gradually ease. High-value solutions grew 25% to EUR 110.3 million, representing approximately 50% of segment revenue. Revenue from other containment delivery solutions totaled EUR 110.5 million, which was consistent with the same period last year. In the first quarter of 2025, gross profit margin increased 420 basis points to 31.3%. Margin expansion was driven by the improvements in Latina and Fishers as we scale operations. This includes activities related to our contract manufacturing projects in Fishers and the higher mix of more accretive high-value solutions, including modest growth in EZ-fill vials. As a result, the operating profit margin for the BDS segment rose to 18.8%, up from 14.1% in the same period last year. In the first quarter of 2025, revenue from the Engineering segment decreased 4% to EUR 35.7 million, primarily due to lower sales from pharmaceutical visual inspection and glass conversion lines. This was partially offset by growth in assembly and packaging lines as well as aftersales activities. Gross profit margins were slightly below our expectations by approximately 50 basis points and decreased to 10.7%. For the first quarter, margins were unfavorably impacted by project mix as we prioritize the completion of the legacy projects in Denmark. As a result, operating profit margin declined to 4.7%. Please turn to the next slide for a review of balance sheet and cash flow. We ended the quarter with cash and cash equivalents of EUR 90.7 million and net debt of EUR 300.2 million. We believe we have adequate liquidity to fund our strategic priorities through a combination of cash on hand, available credit lines, cash generated from operations and the ability to access additional financing. For the first quarter of 2025, capital expenditures totaled EUR 69.7 million, with more than 90% tied to growth investments to advance our ongoing capacity expansion for high-value solutions in Fishers and Latina. We continue to carefully manage trade working capital to support the growth of our business. In the first quarter, we benefited from strong collection of receivables, which drove cash generation. As expected, our inventory levels increased in the first quarter as we replenish inventories that fell in the fourth quarter, driven by strong sales. In the first quarter of 2025, net cash from operating activities increased to EUR 99.8 million. Cash used in the purchase of property, plant and equipment and intangible assets was EUR 71.8 million. As a result, we generated free cash flow of EUR 29.7 million in the first quarter of 2025. Please turn to the next slide for an update of our assessment of tariffs and our revised guidance. As Franco noted, our task force analyzed both regional sales and our network of global suppliers. These efforts are ongoing as the situation evolves, and the team is closely monitoring any further developments. Our current guidance assumes a 10% tariff rate for goods shipping from the EU to the U.S., the absorption of price increases from suppliers and no change in U.S. policy. Based on these assumptions, we estimate a tariff-related impact of approximately EUR 4.5 million to operating profit or approximately EUR 0.01 of diluted earnings per share in 2025. It is important to note that this is based on what we know today, we have implemented mitigation strategies in an effort to further reduce our exposure, and this effort will continue. Discussions with customers have been constructive and are ongoing. Aside from the expected impact from tariffs, all other elements of our guidance remain fully on track with what we shared in March. As a result, we continue to expect revenue in the range of EUR 1.160 billion to EUR 1.190 billion, and we now expect adjusted EBITDA between EUR 288.5 million and EUR 301.8 million and adjusted diluted EPS between EUR 0.50 to EUR 0.54. Our updated guidance assumes the following factors: Revenue will be stronger in the second half of fiscal 2025 versus the first half. The BDS segment is still expected to grow mid-single digit to high single digits and the Engineering segment is expected to be neutral to low single-digit growth. High-value solutions of 39% to 41% of total revenue. On foreign currency, we now assume a modest headwind that has been fully absorbed in the model. Our hedging strategies have limited our exposure, and we assumed a euro-dollar average rate of 1.13 for the period from April to December. With the inclusion of tariffs, we now assume a gross profit margin improvement of approximately 100 basis points at the central point of our guidance. And lastly, the favorable impact from tariffs of EUR 4.5 million of operating profit or approximately EUR 0.01 of diluted earnings per share.

Thank you, Marco. In closing, we had a solid start to fiscal 2025 with strong momentum in the BDS segment as we advance progress at our Latina and Fishers sites and increase our mix of high-value solutions. We are also encouraged by the continued stabilization in the vial market demand as destocking proceeds. The team remains laser-focused on executing against our key priorities and delivering our long-term objectives. Ongoing capacity expansion in high-value solutions is critical to meeting elevated end-market demand, driven primarily by the rise in biologics. We operate in growing markets, and our capital investments are aligned with demand-driven needs. We continue to see a robust pipeline of long-term opportunities supported by favorable secular tailwinds from the aging population with increasingly complex health needs, pharma innovation, and the shift towards self-administration of medicines. These trends align closely with our core strengths. We remain committed to meeting strong customer demand for our high-value solutions. Longer-term, we believe the ongoing shift toward these solutions will support a return to our target of low double-digit revenue growth and drive margin expansion. Our strong business fundamentals and disciplined financial strategy provide us with the flexibility to fund our growth and create long-term value for shareholders. Operator, we are ready for questions. Thank you.

The first question is from Matt Larew, William Blair.

The first one would just be a follow-up on tariffs. I just want to clarify that what is incorporated in guidance is the gross impact from tariffs and that the number of mitigations you're pursuing are not included in guidance and thus, in theory, are upside. And that's kind of the first part of it. The second part of the tariff question is, can you help us understand what percentage of U.S. demand is serviced by U.S.-based manufacturing today? And how much of that U.S. demand you'll be able to satisfy from Fishers, perhaps both by the end of this year and then over the long term?

Thanks for the question, Marco speaking. As Franco noted, we have been working with the task force internally for a couple of months. This includes salespeople, procurement people, legal, finance, and supply chain. We play different scenarios, obviously. Our guidance is embedding tariffs to our customers, also impact on the supply chain and procurement, and it includes finished products, raw materials, and semi-finished products. We are planning to transfer in higher price to most of the customers, the impact. Nevertheless, we see some impact in the supply chain, either in production or in purchasing. And so this is the estimation about the EUR 4.5 million operating profit level we mentioned in the remarks. Basically, we are playing different scenarios. We believe this is the current best estimation we can provide while we are working on further mitigation actions in order to minimize the impact. About your question regarding the U.S. footprint, we want to remind you that we have a factory in California in Ontario. So the combination of Ontario and Fishers are partially offsetting the impact already. And as you know, with the ramp-up of Fishers, we estimate that we will further mitigate in the future.

Correct. And Fishers in 2025 is going to partially absorb this tariff impact because the focus in 2025 of Fishers is to ramp up capacity with our customers in order to execute the actual contracts that we have. But we are still in the phase that we are installing high-speed lines, particularly for syringes. In the medium term, Fishers will be a valuable tool for Stevanato Group in order to compensate for this tariff.

Okay. Very good. And then just a follow-up on vials. It sounds like destocking there is progressing, I think, as anticipated. You've given an outlook for mid- to high single-digit growth in vials for the year. Based on what you saw in the quarter and I assume increasing visibility, is that still kind of the outlook for the year?

Correct. We continue to see positive signals in the market, practically all our customers, both the regional customers or spread in all the regions, in particular, the global key accounts, they are starting to increase their orders. If you compare 2024 with 2025, our order intake is growing double digits, both for bulk vials and ready-to-fill vials. And in fact, we are starting to activate the vial lines practically in all our plants worldwide. So from our viewpoint, this recovery is really moving in the right direction for all of 2025 in order to go to normalization in 2026. So we are happy about this.

And we are reiterating our guidance with respect to vials. So we expect mid-single-digit to high single-digit growth in 2025 compared to 2024 with sequential improvement throughout the year.

Congratulations on the quarter. What is the revenue potential for the Indianapolis and Latina sites in the next few years? I'm assuming we're just at the beginning stages of revenue, but what can we expect from those two sites?

So Paul, Franco speaking, today, one of the major contributor of our growth in 2025 is thanks to the greenfield plants in Latina and particularly also on Fishers. We always share with you that in Fishers, we have planned to invest EUR 0.5 billion to be fully ramped up by the end of 2028. Our goal is to generate EUR 0.5 billion in revenue, thanks to this investment that we are making in Fishers. We always want to remind you that our ratio is for high-value product, EUR 1 CapEx has to correspond to EUR 1 revenue.

And how do you feel about Latina?

Latina is really progressing extremely well because like I mentioned to you, last year, we already delivered in the quarter a positive gross margin. In 2025, we are continuing to increase commercial production, increasing the capacity for prefilled syringes, in particular, for Nexa syringes. We're continuing to install high-speed lines. And also, we have an intense program of validation for our international customers. On top of this, we are starting to prepare a next phase for the large capacity for cartridges ready to fill with one big customer that will be launched at the end of 2026, beginning of '27 in commercial production revenue.

We are not modifying our guidance. We have net of contribution from customers from EUR 250 million to EUR 280 million CapEx in 2025, mainly dedicated, as you can imagine, to the ramp-up in Latina and Fishers.

Maybe I'll tie up a couple of previous ones. On the tariff front, your comments in terms of the hit this year, the EUR 4.5 million operating profit, EUR 0.01 of EPS, that's for the partial year. Any early signs of how to think about that for 2026? And I guess what I'm saying is you'll have a full year of impact, but you also have more revenue shifted to Fishers over time, right? So when should you be able to fully offset the tariff hit?

Yes. I think you fully got the point, Marco speaking. First of all, we are assuming our guidance this year based on the current situation of tariffs with a 10% current tariff from the EU to the U.S. There are different scenarios in front of us with respect to that. Nevertheless, the #1 mitigating factor will be the ramp-up in Fishers. We are generating currently about 25% of our revenue in the U.S. But we expect with Fishers and Ontario to mitigate a lot in the future.

Okay. Okay. And then on the Engineering segment, you called out that the gross profit margin was lower and operating profit was lower this quarter because of the unfavorable mix, the legacy projects. Can you give an update on how those legacy projects are moving through? Are you almost done with that? I guess just sort of asking what should we expect gross profit margin for Engineering in the second quarter and the second half? When will it sort of bounce back to more historical levels in Engineering?

I can start from a business point of view and the execution point of view. So today, the organization is fully focused to execute and deliver this complex program for our big customers that we are producing and delivering from the plants in Denmark. We are on track to complete all the 2025, but the majority of these complex programs, we are targeting to deliver in midyear. This is where the organization is working hard. In parallel, we are working on what we call this operational optimization plan where we want to balance the production in order to mitigate the risk between Denmark and Italy. We are adding more and more capacity for assembly and inspection machines from our plants in Italy in order to really create more centers of excellence. Also, this plan is on track. Today, the organization, like we shared last quarter, is fully focused in order really to reinforce our leadership team, our project management and we have two big hubs in Denmark and Italy in order to be equivalent to serve this line.

Yes, about the sequential margin, well, first of all, the gross profit margin in Q1 was close to our expectations because we knew we had to dedicate a big effort and workload to accelerate the completion of the legacy projects in Denmark. And so basically worked on less profitable projects than the new ones. We expect this fact will be sequentially improved throughout the year. And as guidance, we expect sequential improvement quarter after quarter with the overall 2025 still better than 2024 with respect to gross profit margin.

If I can also add another viewpoint from a customer perspective, if you look ahead, we see a strong demand today from our Engineering division because the pharmaceutical industry is heavily investing in new capacity for bioproduct where this assembly technology in order to serve their growing demand for drug delivery systems is exactly in the direction that we are going with our Engineering division. Once these lines are installed to our customers, it really is going to make the customer happy in order to reiterate our order in the future.

Hopefully, I don't create an echo here if I dialed in wrong. I wanted to ask around the vial recovery, but kind of packaged within the HVS margin drivers. So certainly, you're highlighting HVS vials, EZ-fill vials improving. We were under the impression that maybe standard vials were going to come back first or bulk followed by EZ-fill. So am I hearing that EZ-fill is recovering earlier than your expectation? Part B of that would be, do you expect that to be sustainable over the balance of the year and beyond? So I'll stop there and then I'll follow up.

Well, I'll start with the numbers, David, Marco speaking. So first of all, we are happy in Q1. We got double-digit growth in order intake compared with the same period last year, both in bulk and sterile vials. In Q1, the revenue increase was modest. Nevertheless, we generated better profitability in Q1, mainly for two reasons. One is the good margin we generated in EZ-fill. And very importantly also, we are starting reactivating many lines around the world, and this is helping us with the coverage of fixed expenses also in bulk. So the combination of the two is making us more happy, obviously, than one year ago. But we don't see any change in the trajectory throughout the year; it confirms what we said a couple of months ago.

David, if you can also give us some angle from a customer point of view. Bulk vials is a market that has a size of many billions of containers per year with different therapeutic drugs, all the regions, and several hundred customers. And when they're starting to recover, it's really a big wave. For what is related to EZ-fill vials, we are more in the range of a few hundred million with small, medium-sized customers, particularly customers that are launching new products on the market. So both are growing. We see a positive signal, but there are two different types of recovery.

I can't remember if you've disclosed in the past or if you'd be willing to tell us about your GLP-1 specific exposure in the revenue base. I think for you, it would be almost exclusively BDS, but how much of your recovery here is driven by specifically GLP-1 demand?

So we disclosed biologics that are growing rapidly. I mean we reached 42% as a percentage of BDS revenue compared to 34% last year, and GLP-1 is part of our biologics disclosure. It's an important leg for us, GLP-1, but it's not the only driver of growth. But maybe Franco can give you more color about the market.

Correct. We already shared with you that we have already signed multiyear contracts with our historical insulin customer with whom we have established a very good relationship for nearly 20 years. This customer engaged us a few years ago through our tech center in order to start to validate our products with their molecule. Today, the contract where we are building capacity through our plants in Europe and the United States are for bulk cartridges, Nexa syringes, Nexa syringe double bypass, also vials, and we have a significant program for cartridges ready to fill. On top of this, we also signed a large program for devices, and this is the reason why we are going to add capacity for our drug delivery systems in Fishers. We aim to serve Nexa syringes and also these devices. From an Engineering perspective, our customers are engaging us on high-speed machines for assembly or inspection machines. So practically, all our product portfolio is involved in this new growth.

Next question is from Doug Schenkel, Wolfe Research.

Franco or perhaps Marco, just a point of clarification to an earlier question. To what extent are you baking in a mitigation benefit in that EUR 4.5 million impact? It sounds like there's partial credit in there for surcharges, but you hope to do more on supply chain and procurement in the back half of the year. Is that the right interpretation that there is some mitigation benefit baked into the net impact of EUR 4.5 million?

Yes, it's a good interpretation. For example, we have a global footprint. We produce finished products from many locations around the world. So we can have some logistic optimization in order to minimize the tariff. But this is just an example. The task force is really active in detecting further initiatives to minimize the tariff impact. This is the key message behind our forecast.

Got it. That's helpful. And then my second follow-up, more of a longer-term question really. Look, I mean, acknowledging that pharma doesn't want to cut sort of cost as it relates to CDMO vendors, do you see an opportunity for sort of more vendor consolidation here as they try to protect their margin? And given your sort of complementary solutions, which you called out, is there an opportunity for Stevanato to gain wallet share, specifically because of what's going on with tariffs and the push for pharma for some of their U.S. reshoring efforts and so on?

I'm sorry, Tejas. Can you clarify the first portion of your question? I'm not sure we fully understood what you were getting at there.

Yes. The question is basically around pharmaceutical companies generally don't view their CDMO vendors as a bucket where they want to squeeze out cost because they'd rather work with better vendors with a long track record of delivering on time and without any quality issues, right? So my question is, just given the moving parts here with customers trying to preserve their margins as well, I mean, is there a possibility here for you to opportunistically gain share from some of the smaller vendors that perhaps your pharma customers are working with today because of the noise around tariffs and U.S. reshoring?

Practically, Lisa, I fully understand your question. Today, the tariff is going to give to Stevanato a small pain in 2025 that we already captured this EUR 4.5 million that Marco shared. But it's also true that the fact that we have already proactively decided to invest in 2021 with this big campus in the United States will enable us to serve the U.S. market for syringes, for Nexa syringes for Alba, and for bypass vials. Today also with a significant program on the device, we have further increased interest from our American customers that Stevanato is the right global partner, particularly because of this U.S. plant. But the scope of this U.S. plant is in order to serve the full U.S. biotech market and all our international customers. So at the end of the day, short pain and the long term, we see much more benefit.

Maybe just to quickly touch on the performance within the BDS segment. During the quarter, did you see any shift in customer ordering patterns or timing there or behavior within the companies as they prepare for the impact of tariffs?

Franco speaking, our customers are communicating their forecasts to Stevanato Group as they have in the past. Typically, we establish long-term contracts, followed by a 12-month forecast, and then we receive confirmation orders for one or two quarters based on whether the product is bulk or EZ-fill, with EZ-fill typically seeing longer order intake times. We do not notice any changes in how they are placing orders. Regarding vials, we started observing an increase in their forecast and order intake in the third and fourth quarters of last year, but this increase is mainly due to a destocking effect and aligns with previous trends.

And can you break out just about how much of an improvement you saw from each of the respective buckets for margin impact that you saw for EZ-fill and also the ramp of the new facilities as in what percentage of the year-over-year improvement relates to the improvements in the vial stocking?

So I can tell you that the #1 improvement is related to Latina and Fishers. We mentioned many times last year that obviously, with the ramp-up, we generated more costs than revenue due to validations, training, and all the ramp-up activities. We are very happy about the progress in Latina and also Fishers is starting to generate better results than last year, generating more revenues and gross margin. The margin is still dilutive compared to the overall segment, but we expect a sequential improvement, as we mentioned last March. Yes. And then obviously, the # 2 factor as underlined in the remark is the fact that with 43% high-value solutions on total revenue, the mix is favorable and better than last year.

Marco, maybe one for you. I know you talked about the second half being stronger than the first half. Can you just help us think about just the progression throughout the year, particularly Q2? Just a little context around both revenues and then margins, how we would think about Q2 and then flowing into the second half would be helpful.

Yes. We still expect sequential growth throughout the year, similar to what we anticipated two months ago. We expect that 44% of our revenues will be generated in the first half of the year, with the remaining 56% coming in the second half, along with continuous improvement throughout the year. As mentioned previously, we also anticipate margin improvement as Latina and Fishers ramp up, and engineering enhances in the second half. Regarding vials destocking, we foresee sequential improvement from quarter to quarter. Our assumptions remain unchanged, and we have received some confirmation concerning vials, as well as the ramp-up that we can control. In fact, we are reaffirming our guidance, excluding the impact of tariffs, which is a net effect.

Okay. That's helpful. And then Franco, maybe one for you. Just in terms of the facilities, on the China piece, has the current situation, whether it's tariffs, the overall tensions, has that changed the way you're thinking about expanding into China? I know you guys pushed the facility out a bit, but we're still committed. How are you thinking about your presence in China as we move forward here?

Today, we serve this market from the existing plant that we have in Shanghai and also for what is related to EZ-fill products, we produce in Europe and we ship it to China. Today, it's also true that in 2025 and 2026, our big focus is in ramping up Latina and even more Fishers because if you remember, originally, in 2021, there was also the program to build production for EZ-fill product of high-value product also in China. But then some of our big customers have decided to put it on standby, and they ask us to Stevanato to increase their capacity from Europe and the United States to serve from these two locations. So in order to summarize, Asia will remain strategic for Stevanato because there is a big growth in biosimilars. But today, the primary focus is to execute these two huge greenfield plants to fulfill all the contracts that we have with our customers. One example is the huge program for cartridges. This is a large program, and we need to be laser-focused to execute it with great success because there is a significant contract behind.

Sorry for the technical challenges before. So two topics. First, on guidance. It seems like your updated full-year guidance reflects first quarter upside, both at the revenue line and the margin line, but you're not really changing the outlook for the balance of the year beyond that other than to reflect the tariff impact that you've discussed. Do I have that right? And if so, keeping in mind that orders remain strong, you don't feel like there was any pull forward of revenue or abnormal behavior in the midst of the current policy uncertainty. And again, margins are ahead of plan. Is this just prudent conservatism as a philosophy given the current environment?

Marco speaking. First of all, we are reiterating our revenue guidance. We see there are two opposite effects. On one side, we see some headwinds related to the exchange rate. The Euro went stronger compared to a couple of months ago, and this is a headwind. On the other side, one of the mitigation effect tools we have for tariffs is increasing price or transferring some extra costs to our customers. And this is basically offsetting the currency headwinds in the top line. The guidance we are providing is the best estimation we have today, and this reflects the trajectory we designed 2 months ago.

And from a market point of view, the demand from our customers is robust and well spread across practically all products. It's essential to consider that we are in the middle of constructing and ramping up these huge greenfield plants where the demand is driven by the capacity that we are putting in place. So there are some technical timing that we are going to install this high-speed line. We are doing the validation, we have the green light from the customer, and then we're going to deliver it. So it's difficult to further accelerate this ramp-up because quality is the priority #1 for these international customers.

Sure. So first of all, we still expect EUR 40 million to EUR 60 million negative free cash flow for the year. We are happy about the performance in Q1, driven by strong collection from customers after the revenues we generated in Q4 last year. Nevertheless, we will see some fluctuation quarter after quarter depending on CapEx, but also the fact that we are, for example, paying taxes in the second half of the year. So we are very focused on keeping under control the free cash flow, but we are reiterating our guidance of EUR 40 million to EUR 60 million negative free cash flow in the year.

Ms. Miles, there are no more questions at this time.

Maybe if I can just summarize the sentiment that we have in Stevanato Group. We have a solid start in 2025. We have a robust demand for all of 2025, practically in all our product categories. We see a strong momentum in the BDS segment, and we have a high interest in our high-value products because the biological demand for these products from our customers is very strong. With our greenfield plants, we are on track, both with the installation of lines and validation with our customers. We see visible improvement from an engineering point of view. And also, we are happy that finally, on vials, we see a recovery. So we are fully committed to delivering the results and also even more. We are confident in our long-term trajectory of double-digit growth target of 30% of EBITDA to move to 40% to 45% of high-value products in our products. So thank you very much.

Thank you, everyone, for joining us today, and we look forward to speaking with you in the future.