Stevanato Group S.p.A. (STVN) 6 Aug 222022 Q2 Earnings call transcript

Good afternoon. This is the Chorus Call Conference operator. Welcome and thank you for joining the Stevanato Group Second Quarter Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Lisa Miles, SVP IR. Madam. ahead, go Please

be thank Stevanato, joining and Chairman; A results Lago, and of IR today website. our Marco With is CFO. can today’s illustrating Franco Franco presentation on you morning the us. section for me Dal found Good Moro, CEO;

Management law. filings in or the company’s Form subsequent Risk SEC review statements for today to or as obligation company encourage internal face, meaningful our information uses the a to The non-GAAP results as reflect entitled statements quality trends providing forward-looking our our Item Report results Annual result risks we our our XX-F with will Some those XX, in investors are to by XX-F. conjunction to discussed comparisons. presentation and assume statements XD financial in of its gauging of except in materially events associated the does Such being any may on December not Actual predictions. ended in differ made including in only events be analysis earnings XXXX nature. fiscal in Factors financial be in informative release information. this performance, the you may SEC. year information latest Today’s and believes identifying update circumstances, may forward-looking contain these and contained period-to-period and results information filed revise today with of this required We the

with Stevanato remarks. will the presented For release. most document, earnings please I a this see hand in And company’s measures Franco recent for reconciliation to the the press call opening non-GAAP of that,

we our mix and Stevanato. first for us strategic at our celebrated margin. of against plan expand IPO execute drive continue to of an all exciting our growth, long-term high-value year organic increase EBITDA Last This we has and the to sustainable been successfully anniversary of month solutions

or meeting public objectives we that track of since as a We are exceeding record have our been performance includes creating a reporting financial company.

of environment demand multiyear market driver. by We characterized are durable attractive end robust with in currently an secular operating

We self-administration have aging favorable and set the population, trend of outsourcing the stage capitalize tailwind growth macro medicine. of in toward pharmaceutical on biologic, innovation, to

philosophy in innovation of constant business what of to a our is through customers while product live for this world technology, we at improve we the science, published singular patient have pharmaceutical June, journey, the Our In rooted focus accomplished. proud around driving industry. and the first and support a service start am we report sustainability are and I on

industry, positive As the provider the to hand for and a sustainability to to stakeholders our Thank your to pharmaceutical now support. around for you our the I globe. biotech impact will of continued global make over Franco practice and a embedding we Moro. throughout all call are policy committed

on Slide accounting from company and for growth second expanded of levels, gross approximately total X, record Contributions delivered quarter revenue margin. revenue. solutions Starting reached the double-digit of high-value XXXX, profit XX% for we

raising be successfully ability we to Our guidance. execute results environment, in challenging are full our our and to a pleased year demonstrate

billion. over the For the million €XXX for compared new year. €XXX was order first XX% the second the last increased bringing year, approximately At of last million to topping to quarter, committed intake end million, new €XXX quarter, XXXX order half of our backlog intake second €X

building is Since in In or capacity projects, growth United of nearly our the we on our commercial biosimilars X Dese. our priority operations capital States, in solid efforts. Slide new upcoming remain call, we transition expansion We the plans progress update last an in Indiana. in biologics in late industrial construction completed helped our new on early wave XXXX. started facility our and making the on and to Piombino on the our Italy, Turning Construction for XXXX shape for building. are on complete the on work track

of two addition, our our one for are Alba syringes. premium lines and new plant dedicated In X XXXX line three to EZ-fill operational, line including

EZ-fill the line We to revenue China, second in generation another fall. in the XXXX. the anticipate operationalize of phase are we end in still of And half syringe expect and the design nearing

think meetings are to evolving we as meet over last and the collaboration in of and received with is and our our execution industry several needs a firmly practice. In delivery X, footprint how specifically drug framework many We we about for projects of partnerships, demand which expand industrial to collaboration focused our containment priority systems. the months, address rising want on questions standard partnerships, these the the Slide we we on customers. global On drug our investors

First, agreements, We partnership This the guides investments needs understanding capital which is broaden by intimacy, keeping challenges. R&D, customer their capability framework trends our of foundation anticipate we and do. must the of all our at everything tackle fostering and set. help them customers greatest any heart of customer market

the transitioned long-term market That cartridge Our and ready-to-use quality, real increase containment, platform. and ownership. consider come. in improve transition to only and ready-to-use is vials and and ready-to-use our desire our market of sterilized Stevanato with We market to decades drug less known of washed strategy. needs to total Today the the format customer the as the was cartridges customers trends a market reduce to X% strategy vial EZ-fill to efficiencies, demand format. gain than driving In about matching first cost of to by X% speed customers of see has to market

and include collaborations our platform, service agreements. EZ-fill market-leading the sales our For

galvanize We using This technology, vast also the fill it the other with process It cartridges. a good the which because the and also industrial is by ability from industry finish establishes to platforms suppliers the By and standard customers our players. for processes same to in to ready-to-use technology important and IP of licensed same vials producers. also this, platform, doing multiple is our line gives support this and supported the delivery majority customers and needs source enabler bring for we partner money. their for approach help choice We our role partnerships come. believe In cement drug our of value and a a decades power product can our us players of the biotech us We customers’ capabilities to to space, portfolio. the integrated help and for transition. broaden better leading pharma serve as as market will

on the the to current Turning geopolitical crisis European prices gas and XX. Page

of manage. we From Italy prices a last Europe directly We our them in is closely, natural gas usage months, with conversion the are supply must it in working for monitoring majority keeping the is the side, increased costs have and we accordingly. adjusting situation X are but our in customers, something and glass informed Energy our vast operations.

by reports swift has countries signing supply. As Italian indicate, dependence the gas taken its agreements to to lower other with press diversify on government Russia action

our for be XX, role in on priority in COVID. during pharmaceutical Given our supply mission-critical I similar to Page we efforts eligible to designation our And the we want chain, sustainability. that status would believe lastly team’s commend

Our and of transparent XXXX for it setting nonfinancial to Most provides results report considered ESG reporting the The company’s the importantly, stakeholders. our creates financial future group. performance report the highlights and complete sustainability targets. the foundation

to global to assurance and the accordance over hand Marco. reporting Our sustainability. commitment to call limited was demonstrates I the report our subject initiative with will in standards, which is prepared

in million, performance second increased segments. over €XXX.X basis are on by a engineering an related Thanks, quarter based constant segment COVID, our to core is strong to the XX% on offsetting the and guidance Franco. currency XX% Starting pleased declines growth for business, outlook we improved raising on year be revenue the year-to-date in Slide favorable Today, to driven prior in which effects. XX, and currency our revenue both

the for X% the revenue COVID to decline same second to XX% XXXX, related revenue For continued period of last quarter represented compared and approximately of to year.

the to year. and have expanded profit currency, approximately second impact second and by in mix revenue BDS favorable profit COVID points XX segment the gross the XX.X% last Engineering in quarter the quarter the basis Excluding of margin in compared segment. margin increased same grown favorable driven XX% the Gross XXXX from to in would period

public increases G&A year, reflect SG&A, the Turning the of with and investments the expenses business status. to to in the cost company associated the support to compared growth prior

due As equity last plan. onetime change termination an incentive year a the for a of was quarter second in the reminder, the of biggest to benefit year-over-year

For the needs in capacity. million recorded the COVID-XX-related €X decrease a process that reflects production We in which quarter lost customers incurred revenues, and modification, arrangement reflects contra company changing reallocate the changes equitable approximately and of in fair believe second time, support a and other XXXX, of our the to representing income business. cost for modification to

is flexibility customers intimacy their important believe their new the different With in effort capacity and making of various pathways and the We are variants vaccines, long-term. efficacy customers’ rise to element that our appropriate over adjustments offering customer to of plans. supporting COVID-XX an

operating costs in quarter, margin profit million start-up second on an the resulted net diluted This was and in a earnings of certain or U.S. adjusted per the €XX.X profit XX.X%, of €X.XX share. XX.X%, excluding For basis,

the adjusted As profit expected was XXXX compared net €X.XX higher quarter of in average year. second outstanding shares and last were number Adjusted million of the were to also. weighted diluted €XX.X EPS

X% XX.X%. represented million Please Diagnostic €XX.X revenue. segment in customers approximately prior margin Revenue delivery for last posted million. second million year mix the high-value higher COVID year-over-year and the from EBITDA same segment In XX% to million margins For and favorable €XXX.X from to Slide period to the segment to segment solutions Revenue approximately EBITDA was revenue down compared external the results. revenue, The to currency Despite adjusted other led Solutions €XXX.X second year quarter, X% increased turn increased basis. on same to shift constant of containment adjusted was the and XX% in BDS last to year. and and the still Biopharmaceutical the growth. was the solutions X% decrease quarter, a from compared period €XX.X over XX

financial basis strong quarter second basis profit customer demand margin profit solid segment XXX gross quarter, business delivered to the increased operating points and and XX.X%, XX XX.X%. results, another points by growth lines. driven grew Engineering The of all to margin in For

derived to the increased prior the million year. For second compared external customers from XX% €XX.X to revenue quarter,

we For ongoing effort improved activities accretive driven quarter XX.X% expansion projects million the XX, and and more as by strong Slide to from equivalents after-sales second efficiencies. to margin XX.X%. cash And million. margin and to Margin net gross financial contributions On June was well profit sheet. position of continue cash had we XXXX, of optimization a business as improve XX, profit increased positive maintain of to of operating balance €XXX.X as operational and a €XXX.X

second the generated from cash was quarter, €XX.X million. operating For activities

business reflects sustainable growth. investment working As to fund long-term the expected, increased capital in ongoing

as hand in security to the the aim continue to the supply of for We prudently business we keep inventory balance supply chain current more on needs environment.

global expansion second a capital our on million quarter. €XX.X progress of plan, which in advancing the resulted are We in expenditure

expected, our the we As spend a Slide behind cash driver number flow are which million. CapEx was year full factors. main XX, raising of negative considers of €XX.X guidance, On free the

First, overcome allowed us strong has This our we are revenue has from decrease COVID. a forecasting headwind. core demand been in offset which by business, in to this

Our full total will related year forecast XX% our from be low down previous revenue of approximately assumes guidance in COVID, the now to teens.

assumes favorable approximately guidance a year This guidance, €XX year resulting impact currency our currency Second, guidance the in for assumes initial of €XX which net year, million XXXX. of for million from full impact. over our just to revenue favorable revenue full €X compares million to of increased our effect change favorable

expect for outlook fiscal our improved prior now of growth up single-digit. from double-digit year, Third, our original XXXX Engineering the year high revenue segment, we over guidance an in

still guidance the effect inflation. our considers Lastly, of

we €XXX a compared to €XXX the expect of now to revenue from in to to €XXX prior €XXX the million guidance adjusted the to million €XXX our €XXX million. prior range of in €X.XX million, million of of €X.XX, As compared in million €X.XX million estimates of to prior adjusted EPS of with diluted €X.XX, million up EBITDA to range result, €XXX.X range and guidance €XXX.X

pass in back the range will comments. to Franco closing Our unchanged call Moro remains sum dollars. absolute I spending for CapEx

entire an in are to we supporting end of satisfying providing investing multiyear Italy, In meet scientific Above closing, all, the strong in priorities, And our a growing of and set markets solutions, premium needs. four high-value expand rich drug These expansion advancing remain the the shareholder and drug in through capabilities are operational and innovation open on building support operational U.S., customers capacity driving innovation demand, and operating mix growing needs a secular let’s opportunities drivers. primary our questions. and by margins capitalize and environment to evolving R&D through advance by them that, China the successful of Page to XX, on We we growth, focused value. of new excellence And up delivery cycle. it customer of including their are our strategic and for packaging execution multiyear end-to-end life our pipeline global lastly, drive priorities sustainable EBITDA specifically market on with build trends long-term to systems. designed organic that

Thank you. Please Instructions] ahead. The Paul first from go [Operator Knight is KeyBanc. with question

Hi, take leading should read engineering indicator Franco we what’s this we’re seeing the as in demand year, Moro, on the So a growth? high that engineering for that strong your more HVS future? on this growth

Paul. for segment. this engineering, in increase see Yes, We what happen sure. a later on business Hi, can of of signal BDS

biosimilars our and future. customers growing that and Our also environment high-value mostly in business. opportunity in good for see healthcare to have of amazing to is linked We in customers our are are biotech solutions the initiative worldwide, more investing pharma because a we

So I are that needs of around initiative standardization, in trend, level of and the and expansion world the in linked China. of we this the services is terms our customer also to our U.S. in innovation, matching confirm of terms that

you’re initial thoughts last have Do obviously on XXXX? COVID would be And this question down year. the any guiding you

No.

of terms uncertainty the we In level see business, of COVID. the in some future still about

to and close for dose the about remember to But can single the speculate transition vial terms year you to We continue that neutral is early positive too next to of it’s us or mid see or long-term. business. in the

see line this trend somewhere landing sure, to For in our with the for expectation vaccine. in business is business regular the

you. thank Okay,

William The with next Please go Blair. question from Justin ahead. Lin is

way Hi, if necessarily status your quick, to impact according the clarify in quarters can prices really gas don’t any you the the likely good things means morning. what quantify On your natural can coming you plan? you? margins priority for go And

Yes.

shortages. glass have commentary, gas Italy, we our In is a chain supply if because So as we action taking mitigate special of vaccination so my the our at government pharmaceutical of I immediately say attention Italy I converting most that the of of pandemic the business to in start we told the from we started, as are the And of receive usage that when government. in our of part terms a in look risk the lot a the special past operations. received because to we

on And energy we terms we are monitor our in XX%. supplied terms more in and in regular is of think there with So It’s major our attention. consumption the cost to shortages, in afraid the different of this by are chain electricity, pharmaceutical not special supply on a the country, than trends of to gas customers. pass about situation initiatives we prices, a where this also government Germany

not cost may my in impact the of are operation, we Marco impact the So complement that confident answer. will utility in of we our term COGS. term of on

Yes. Sure, Franco.

than sales X%. that to on Just less remind our XXXX, of cost in utilities was

slightly now It increase. an our on is cost. had above above percentage we So total that manufacturing X%, but

higher are so customers, say, in our expect in price Franco XXXX. don’t an inflation as to P&L we we impact from passing So

Just patterns? want very customer customer start changes That’s been thanks. you some any some customers therefore, X the and you forward? destocking sense building to do that. And Okay, in And helpful. inventory see going sense might a from have we in seen years that past of impact get the to get have ordering

changes. significant the about report cannot We

that is You Obviously, customers this our have strong. to have The secure seen supply. very wanted demand a environment, is strong. in very order intake

solution and the confirm capacity progression focused area to helped strong. look I is that with in has in And is very in have we very, mostly long-term. because continue intimacy on demand this shape us mid they the So high-value our them the

Thank you. that’s Okay, fair.

with The America. ahead. is Derik next from De question Bruin Bank of Please go

Thank taking my morning. I’ve you good for question. Hi, two. got

XXXX? that one is the in where ahead first think were. a of high-value we How the number So quarter points about couple do exiting solutions XX% of the we was

before. Yes, because high-value speed consider linked a that from quarterly need up But what some it’s really activities of high-value customers term engineering we the to are mentioned at solution quarter-by-quarter see we planning high-value stronger pulling benefits We and a very us fluctuation because if coming solution of the product consistent still solution. good of news, demand. of for the value that are have all, of possibility next terms it’s increase quarters, we also customer confirmation is in to the terms the partially in not that two to in look for by providing absolute in demand first demand they to also compensated like lines shares other

landing at next growth somewhere the will you the and for look to around full to updated consistent between landing see additional of time, XX% in the years, keep fair same in works. shares, in the year next XX%. the we it’s the in longer we So XX% run In XXs,

Great. from Thank contribution COVID the you. And just this on year.

essentially for the roughly, €XX Your implies in of year. half million know, XX% back guide the I total don’t revenues

step-up So be sort dynamics that – I from the demand the that that like year? correctly a levels. or Am XQ half COVID seems in back for would could of explain of you the and reading

Your guidance numbers by our covered our – backlog. is It’s are basically accurate.

what orders plan we contract see. So expect We we modification. the This don’t further today. committed is can

covered have And our we fully guidance is backlog. this in by what so our

Got it. you Thank very Appreciate much. it.

Thanks, Derik.

with Donnelly go Patrick Citi. from is question next The Please ahead.

as setup we ‘XX kind margin and some this on we the kind a factors? for the through you gas mix pieces thanks high the those way supply taking moving for our takes gives just some go and the of Marco, between of margins. of year the the of the you piece the Hi, broad Obviously, on Can with chain, questions. with FX, shift work maybe talk as lot of about then one pricing, into pricing, value.

point guidance, expect center million. range we mentioned, the in as the we About of €XXX the

We segments margin. margin on on growth keeping engineering, can improving double-digit is the can About overall, gross in the see. we profit shift you solution to have expect depending helping, and mix. XXXX. to color More organic in we is both BDS, expect project value trajectory gross both about as the profit into fluctuation compared segments quarterly expand some But the high

us rightly profit cost is fact through bit increase able that price in adding margin our without mentioned pass a little You gross for the to our for dilutive also been in margin.

margins X% profit we XX% segment, basis our a points imagine XXX profit you gross have is margin. gross BDS in diluting If inflation

to value is more this. to offset shifting the expected solution high So than

So improving we profit segments. are confident to keep in both gross on our margin

helpful. That’s to one And about to strong whether really drive growth then the growth various just elevated it’s kind of you maybe that solutions or certain continues continuing the drivers, high-value the product side on bases are talk there? customer that there. be Can

scientific something both we preserve molecules kind this and but are the solution high-value of is on company business, It’s because sensitive of treatment. core of the other molecule, of is customer special in really strong integrity that not with biosimilars on the solutions keen the highly we biotech new is of treatment. new, their the one terms more Yes. because are to provide of focus demand answer in And needs best proposition that containment value our requirements the the here, new play pillars that and that to particularly side, this side,

that wanted they want limit expenditure are have don’t in And capacity, pharma sometimes, company, internal don’t big only they to smaller or and not CapEx. they their

format flexibility, or answer EZ-fill are the of best reduction, terms of ready-to-use in ownership to in cost market. of solution total speed terms high-value So

therapeutic scientific the ownership customer, are because mention or therapeutic of saving needs I are on and the cost main specific total many requirements, focused area cannot biosimilar areas, two reduction. So for we biological of

go Steven The next Please Jefferies. with Couche ahead. from question is

straightforward I Steven the shown associated of for a Is we for different. are sounds questions. I times, first clean the other Thank is bit modification guess in there from up that the this the Windley. of take-or-pay modification with €X Most hear Hi, that taking Dave you and one have might all million million or is, that these contract contract. net the wanted COVID and to on expenses, might their my it in BDS? like fees. costs little sort be of that This income that’s up €X

for Thanks question. the Yes.

agreement. agreement, the would First we of all, contract replaces had fair change. a business have the agreement The if didn’t consider we

somehow reallocating cost and capacity. revenue, it’s the time production compensating So occurred loss the of loss in process

full to something tied to not year agreement, not is cost respect expect with this profit. had change And it’s we related period. this we this relevant in business, the in So our don’t to guidance the way,

Okay.

either up just quarter? so cost reiterate that €X fee or up And ES for million the in that, BDS not show did or revenue did show to not

occurred is reallocate cost our It to a capacity. fair need of but in BDS and it’s segment, compensation

That’s in that correct. through They not revenue, as line. the come did income came through other

revenue second Okay. give outlook. or line? obviously, one, way your EBITDA FX, of Perfect. a are your of Thank maybe relatively to you. with of that And the Can is, maybe the EBIT framework full helping then year And expenses us FX another matched you basis the flow-through asking on guess an exposure? FX the I

Thank you Yes. right. the question. for are you Yes,

a We costs. line, the the dollar. U.S. of relevant is in costs top both also denominated in driver in the main have That changes, also but of part

– the top keeping that the modest But with So compared increase. we impact on estimate in it’s in line an impact mind favorable the EBITDA.

XX% sorry. €XX EBITDA million we estimate XX% to about we to have So – impact the compared revenue,

model have denominated XXX we XX is having dollar the So costs revenue in denominated assumption in dollars. and in the

Perfect. Okay. Thank you much. very

John with next ahead. UBS. The is from question Please go Sourbeer

just to question. there the Maybe growth and the bringing the be one taking you’re strong another lines for that in Thanks continue the Italy. on HVS, specific to online Hi. maybe

impact that that line fall three And the does the accelerate think then on why lines the from year, the new that in starting that’s this to now of online, I lines one and Are HVS is them two the two are those approaching come there fall. new you how in penetration? see With XX%?

a started Yes, that putting more ago. something capacity in year we is place

the activity. only the also terms the of proportion this the line see you availability but of progress So depending validation quarter-by-quarter, different of in not impacting

that last capacity have cannot we the validation But two minor the we to year. a because and good So seen running be total XXX% in confirm put that expect have last some have impact line the because the from we have the lines in also the have I already quarter, to can we of compared immediately to expect then run activities. of capacity the the the part part the year to in utilization impact we

– the our look So investment the high-value high-value scenario, that in And can capacity we accordingly, demand are the if and matching our constant the customer solutions progressing solution you biggest improving you of are but we our at for see investment portfolio. see that share is very high. of in in

you Thanks. out? with there any on can or And Any capacity that performance. the the lockdowns building China just the color the there? did a business you COVID from regional And expansions provide on impact follow-up you’re see

environment as the the In factory. customers’ second the as revenue in And slowdown effect. in mentioned, driven also quarter, experienced in in Yes. obviously This we slowdown our a it a mainly we COVID Asia slowdown. you temporary Pacific, consider by

We continue to count on Asia Pacific our growth. for

for Thanks the Okay. questions. taking

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

Thank want we look today’s We us with the for today, thank operator. to talking And you conclude future. forward can you, I and to joining call. in everyone