Conference Transcript - STVN 2026-05-12

Operator

Thanks everyone for joining us. We'll kick things off. My name is Mike Riskin. I'm on the Bank of America Life Science Tools and Diagnostics teams. And we're excited to kick off our Bank of America Global Healthcare Conference in Las Vegas, 2026 edition. Thanks everyone for being here. I hope it's going to be a great conference. For our first session of the conference, we're very excited to host Stevanotto. We're joined by Marco DeLago, CFO, and Giacomo Giuducci, VP of IR. The format will be, we'll have a couple quick slides to kick it off, just a couple minutes, then we'll do a fireside chat and Q&A towards the end. Marco?

Marco Dal Lago, CFO

Thank you. Good morning, everyone, and thanks for joining us. As Michael said, just a couple of slides to introduce the company. So we are a global leading provider for mission-critical solutions for the biopharma industry. We manage our integrated value proposition through two different segments. The first one and the main one is the biopharmaceutical diagnostic solution, which represented last year approximately 88% of our revenue. The other segment is the engineering segment, representing last year about 12% of our revenue. Starting from the left, our core business is represented by drug containment solutions. We can provide to our customers different formats with different level of qualities, both in bulk and sterile configurations. We are a market leader in cartridges for pen injectors. We are the first mover also in easy fill configuration for cartridges. We are number one in sterile vials, and we are number two in pre-fill syringes. Another important piece of our value proposition in our BDS segment is represented by drug delivery systems. We started the journey in drug delivery system back in 2020. We are growing rapidly. We develop our solutions in pen injectors, auto injectors, and wearable devices. And we are ready in 2026 to start our commercial production for Alina Pen. Moving to the right engineering segment, we provide to our customers assembly and packaging lines, predominantly for devices we provide the visual inspection machines for the pharma industry and we master the technology of glass converting that is a very important piece of our value proposition because it's serving the other segment enhancing the quality of our products keeping the cost at the right level and increasing our flexibility in providing solutions to our customers an important piece is represented by analytical services not in thermal revenue but due to the fact that we can work with customers to enter at the early stage of the drug development to help them in finding the right solutions of the combination between a drug and containment so thanks to that we work with customers usually for decades starting from the early stage of the drug development to the commercial phase where we stay for many years our products are included in the regulatory filings or products are in the drug master file so this is helping us to keep an eye customer retention because very often the cost to switch is very high okay moving to the second slide, we have a long track record of double-digit organic growth. We have more than 70 years of history. And we are well positioned to be a global leader in the industry. We saw in the previous slide our unique value propositions that is a key competitive advantage for us to serve the industry with high flexibility and different type of formats and solutions. We can leverage on secular tailwinds. We see the growth of biologics, where our high-value solutions are particularly suitable for, due to low silicon content, high mechanical resistance. We see the growth of GLP-1s, where we won a good share of the market. in glass containment solutions thanks to the capacity and the flexibility we can provide to our customers switching from different formats from nexus syringes to sterile cartridges to dual chamber syringes so we want a fair share wallet other secular tailwind we can see is the self-administration of the drug I mentioned before the drug delivery system development we did in recent years and what we can see beside biologics GLP-1 and self-administration we see the trend in pharma industry to focus more and more on the core business, on drug development rather than in production so this is positioning us as an ideal partner to serve the overall pharmaceutical industry following our IPO, we decide to deploy our capital predominantly in increasing our capacity in high-value solutions. We invested significantly to gain customer proximity both in Europe and North America with our plans in Fishers, Indiana, and Latina close to Rome where we are installing more and more capacity validating new lines with customers and we are increasing rapidly in those to new plans. We entered in 2026 with a strong momentum. We have been able to grow double digit on a cost and currency rate also in Q1 2026 compared with the same period last year. Mainly driven by the main segment, the BDS segment. We grew 16% on a cost and currency rate in BDS segment. Mainly driven by our high-value solutions that grew 17 percent compared with the last year they are presenting today approximately 47 percent of our overall revenue and we see we see strong strong momentum strong growth in high-value solutions driven by biologics and GLP ones the main driver of growth has been predominantly in our our nexus syringes that are very suitable for self-administration due to mechanical resistance. GLP-1s is an important tailwind for us. We see it as a durable trend and tailwind. Today, the revenues in GLP-1s are representing between 21% and 22% of our overall revenue. we are serving the market predominantly with the high value solutions I mentioned nexus synergies but we can see starting traction also in strike cartridges 21 to 22% compared to last year same period we grew more than 20% in GLP-1 we are executing our plan of growth and also margin expansion we have been able to increase our gross profit margin by 30 basis points in Q1 2026 more important we have been able to expand our adjusted EBITDA margin by 150 basis points and this is very consistent with our guidance for 2026 maintaining our trajectory of growth and margin expansion thank you great Thanks so much, Marco.

Operator

That was a great overview. Maybe we'll pick things up right there on the first quarter result and how it played out relative to your expectations. What were the biggest surprises from the quarter? You called out the strength in BDS and HBS. Engineering still seeing some challenges. Can you talk about the puts and takes of those two parts? What was a little bit better? Maybe what was a little bit more challenging in one queue?

Marco Dal Lago, CFO

Q1 was largely in line with our expectations. we have a very strong visibility and growth in the BDS segment. As I was mentioning, driven mainly by high-value solutions. We grew 17% there. By the way, we have been able to grow 9% in other containment delivery solutions. So overall, the combination of the two had passed growing 16% on a cost and currency basis and 13% on a reported basis. The main driver is the growth of biologics and GLP-1s. GLP-1s, we went up more than 20%. So the big driver in terms of product has been, again, Nexus syringes. But we are happy about the visibility we can see in the overall high-value products like Alba syringes. sterile cartridges are exceeding our capital market expectations the conversion from bulk to sterile is gaining traction this is the main reason why we decided approximately 10 months ago to convert one easy fill bias line into easy fill cartridges to accommodate high demand so good visibility and good growth engineering it went down 31%. It was expected from our side due to the current moment in the visibility we have about the current backlog, the backlog we had at the end of Q4. So it's largely anticipated. We see margin expansion there following the difficult period that we had in 23 and particular, in 24 and particular in 25 with respect of margin. We are exiting from the legacy not profitable projects in Denmark for highly complex machining, assembly, and packaging, and we are managing the situation as anticipated.

Operator

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

Marco Dal Lago, CFO

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

Operator

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

Marco Dal Lago, CFO

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

Operator

Okay. And something you called out on the quarter was that you did take that one line where you switched from ready-to-use vial to ready-to-use cartridge where you converted an existing line that was underutilized capacity. Could you talk about that in a little bit more detail, sort of the build-up to that?

Marco Dal Lago, CFO

Have you done moves like that in the past and sort of the opportunity to do that to flex the manufacturing base in your existing capex to meet evolving customer needs yeah again the peak for vials has been during the pandemic so in 22 23 we saw that this talking in 24 we have a sufficient installed capacity to serve the market today the marketing vias we see it growing mid single digit on average with more traction in sterile configuration than in bar configuration. So looking at the demand we saw approximately one year ago the demand growing in cartridges and having us not enough capacity to serve the market waiting for the installation where 400 that is producing commercial revenue in 2027. So we decided with our engineering department to switch the technology from vials to sterile cartridges and this is another tool of flexibility we have to adapt the demand without installing no new machines but leveraging our ability to have flexibility, speed to market, and lower capex with that. And how long did that process take Well, from the decision to the start of the commercial production, approximately 9 to 10 months.

Operator

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

Marco Dal Lago, CFO

Yeah, the good news is that most of the CAPEX has been already deployed, so we spend the money to create the infrastructure to develop and buy the machines, and so most of the money went already out. We expect now to grow significantly our revenue, driven by the capacity we stole. The good news is that the capacity is matching market demand. We have very good visibility. We stole, so far, most of our capacity for Nexus syringes, for high-value syringes. We have almost completed the phase related to syringes in Latina, where we are growing significantly in terms of installation, validation and commercial revenue in q1 2026 latina plant is not anymore dilutive compared with the average of the segment so we are very happy also about the financial performances we still see room to increase in latina because there is a high concentration of a high value product there about fishers it's a bigger plant it's a green field we are in line with our plan that is to reach the full capacity the full ramp up by second half of 2028 so we are sort of in the middle of the journey we see improvements every quarter so far we installed and validated and generated commercial production for nexa syringes too, also in fishers. We will be starting the production of drug delivery system in the second half of this year and for 2027 we plan the installation of ALBA syringes and we have already installed also a sterile bias line that will be validated in the coming quarters. Okay.

Operator

So, and when you talk about, you know, full capacity by second half of 2028, that's when you'll see sort of full margins as well?

Marco Dal Lago, CFO

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

Operator

the sort of peak contribution we can expect from fishers and latina you know the old paradigm of one dollar or one euro of capex is one year of revenues is that old and is that you know the right ballpark of what we should be thinking about you know in 2028 29 and sort of like the incremental contribution from these you're seeing some of it already so yeah yeah it's the The rule of tumble is when we talk about high-value solutions, we can estimate one euro capex, one euro revenue when fully ramped up.

Marco Dal Lago, CFO

This is the case for the high-value solutions. That is giving us confidence to have, as I was saying before, a big room for expansion in the coming years in revenue and profitability. important we are matching customers demand so it's not only the capex it's the fact that in investing in syringes for example we match the needs of our customers we are doing the same for cartridges with multi-year visibility so in high value solution we believe yes we did a very big capex in the past but we believe it has been the best way to deploy our capitals after IPO.

Operator

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

Marco Dal Lago, CFO

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

Operator

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

Marco Dal Lago, CFO

It's a little bit early to project 2027 because, you know, it's a project business so we have backlog for 2027 but we still have to fulfill the backlog we are it's important to underline we are recognizing our revenue on the percent of completion basis so part of the orders we are winning will be converting to saving 26 and part in 27 so we are starting gaining more visibility on 2027 but it's a little bit early to talk about numbers what i can tell you is that we see strong interest and good

Operator

pipeline in visual inspection machines and assembly and packaging lines okay um and just in the last couple minutes we have left um you know you touched on margin expansion um and sort of the road map there a number of times um you know both from bds and hbs underlying demand and volumes mix shift and you know latina fishers coming online and then also getting past the engineering headwinds can you talk about margin trajectory this year and then longer term what that algorithm what that formula looks like no our journey we we explained during capital markets day it remains intact we see we've been able to increase uh adjust a bit the margin by 160 basis points

Marco Dal Lago, CFO

last year, and our guidance for this year is a further expansion of 150 basis points. But this is the trajectory. I mean, when you put together the fact that biologists are gaining traction, GLP-1s is a durable tailwind, this is driving the increase of the share of our high-value products. I mentioned before, Fishers and Latina we are dragging they are still diluted in the combination of the two and on the opposite we plan that when fully ramp up will be significantly accretive for the mix of the segment so if you put this together with the fact that we need to slightly improve our engineering business we are confident to do that our trajectory will grow and margin expansion remain intact our goal is to reach 30% of just the bid at some point in 2027. So the trajectory is there. There can be some quarterly anticipation of delaying getting there, but we are very committed and confident to get there. Any questions from the audience?

Operator

I'll throw in one last one. We're almost out of time. You talked about CapEx and free cash when the requirements the heavy lifting has been done yet but this typically is still a very capex intensive industry and market so what's your what are your plans for um cash use going forward and following the ipo the peak was in 2023 with more than 430 million of capex we went down in 24 and 2025, we see 2060 between 240 to 260 million of net CAPEX.

Marco Dal Lago, CFO

This is related to the execution in Fisher's and Latina. But level of CAPEX is going down in 2027 and our goal is to go back to our 10% CAPEX on revenue to keep on growing high single digit, low double digit. So the cash flow is coming. 2026 we are still between neutral to 20 million positive. After 18 million positive free cash flow in 2025, we see significant improvement in cash flow by 2027 and beyond.

Operator

All right.

Marco Dal Lago, CFO

Well, thank you so much.

Operator

We're out of time. Thanks, everyone. Thank you, Marco.

Marco Dal Lago, CFO

Thank you very much.