Stevanato Group SpA Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 Performance: Revenue grew 2% in 2024, driven by 6% growth in the BDS segment, which offset a 70% decline in the Engineering segment. High value solutions accounted for 38% of total company revenue in 2024.
• Growth Investments: Significant progress made on growth investments. Latina project turned profitable in Q3 2024, with teams focused on ramping up syringe capacity. Fisher facility is making progress with commercial production launched and new syringe lines being installed/validated in 2025. Expansion in Latina for EZ-fill cartridges capacity is ongoing with core infrastructure build-out expected through 2025.
• Vial Market: Saw temporary soft vial demand in 2024 due to industry-wide destocking. Anticipate gradual recovery in vial demand in 2025, with faster recovery expected in bulk vials.
• 2024 Milestones: Generated first commercial revenue in Fisher, Indiana. Latina project in Italy turned profitable at a gross profit margin level in Q3 2024.

Segment Performance

• Biopharmaceutical and Diagnostic Solutions (BDS): In the fourth quarter of 2024, revenue grew 7% to €279.4 million on a constant currency basis. Driven primarily by growth in high value syringes, offsetting a 14% revenue decline related to bulk and EZ-fill vials. High value solutions revenue reached €130.6 million in Q4, accounting for 47% of BDS segment sales. For the full year 2024, revenue in BDS grew 6%, with high value solutions representing 38% of total company revenue.
• Engineering: Fourth quarter revenue decreased 16% to €51.2 million. Performance was mixed with expected revenue declines in glass conversion and visual inspection offsetting growth in assembly and packaging. Optimization and cost management initiatives were in place to improve the segment's performance.

Guidance

• 2025 revenue expected in the range of €1.160 billion to €1.190 billion.
• Adjusted EBITDA expected in the range of €293 million to €306.3 million.
• Adjusted diluted EPS expected in the range of €0.51 to €0.55.
• BDS segment expected to grow mid to high single digits, driven by growth in high value syringes. Engineering segment assumed to have neutral to low single digit growth. Gross profit margin expected to improve by approximately 100 to 140 basis points in 2025, but Fishers and Latina facilities still expected to be dilutive to margins in the near term.

Risks

• Vial market recovery may be slower than expected.
• Margin dilution from new facilities (Fishers and Latina) in the near term.
• Uncertainties related to tariffs and regulatory changes impacting operational and supply chain strategies.

Question and Answer

Q: On the vial recovery, when will it be fully back to normal?

A: Franco Stevanato stated that there are signs of improvement with customers starting to normalize ordering patterns, and a gradual recovery is anticipated throughout 2025.

Q: Can you comment on the utilization levels of lines across different form factors?

A: Marco Dal Lago mentioned strong demand for syringes, similar situation with cartridges, and vials having available capacity with expected growth in 2025. Franco Stevanato added focus on ramping up capacity for high value products like cartridges due to increasing demand.

Q: What is the expected revenue generating capacity of the Fishers facility in 2025?

A: Marco Dal Lago said Fishers is progressing with new lines installed and validation from customers, expecting a big increase in revenue in 2025 but still having room to scale up further in subsequent years.

Q: How do you view the impact of administration changes and tariffs?

A: Franco Stevanato noted a strong global footprint with consistent quality across regions, and investment in Fishers to gain customer proximity. Marco Dal Lago added limited risk from vaccine-related revenue as it constitutes a small portion of total revenue.