Stevanato Group S.p.A.

Good morning, and thank you for joining us. With me today is Franco Stevanotto, Executive Chairman, Frank Gomoro, CEO, and Marco De Lago, CFO. You can find a presentation to accompany today's results on the Investor Relations page of our website, which can be found under the Financial Results tab. As a reminder, some statements being made today will be forward-looking in nature and are only predictions. Actual events and results may differ materially as a result of the risks we face, including those discussed in item 3D entitled Risk Factors in the company's most recent annual report on Form 20F, filed with the Securities and Exchange Commission on March 7, 2024. Please take a moment to read our safe harbor statements, including in the front of the presentation and also in today's press release. The company does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances, except as required by law. Today's presentation may contain non-GAAP financial information. Management uses this information in its internal analyses of results and believes this information may be informative to investors in gauging the quality of our financial performance, identifying trends in our results, and providing meaningful period-to-period comparisons. For reconciliation of the non-GAAP measures, please see the company's most recent earnings press release. And with that, I will hand the call to Franco Stevanotto for opening remarks.

Thank you, Lisa, and thanks for joining us. Today, we will review our first quarter performance, address our guidance change, and provide an update on our markets and the dynamics we are seeing today. While first quarter results did not meet our expectations, the fundamentals of our business have not changed, and the demand landscape remains robust. We are tackling two challenges today, and our number one priority is execution. First, the impact from the industry-wide temporary stocking was more pronounced than previously expected, especially in the more creative easy-fill buyers. Customers are still working down excess inventories that were stockpiled during the pandemic. This has resulted in a temporary softening in demand for both bulk and ready-to-use vials. But we believe once the market rebounds that vials will return to normalize market growth rates. Second, in the engineering business, we enjoyed a period of record orders in the second half of 2022. This large volume of work and long lead times for components put stress in our organization last year. But while external factors played a role, our execution simply could have been better. We're taking many actions over the last year, and we believe these steps will help us achieve a more optimized operational structure to maximize efficiencies to secure the success of projects going forward. I would like to take a moment to address our updated guidance. The temporary stocking is the main factor in our guidance change. Our updated guidance also assumes a recent postponement of expected orders for high-value solutions for a large customer that were forecasted to be shipped in 2024. This was due to a change in the customers' commercialization timeframes, but nevertheless, we have removed the forecasted orders from our guidance. Despite these factors, we remain confident about our long-term prospects, and we remain on the right path to achieve our near-term targets in 2027. Our unique value proposition of integrated offerings ideally positions Stevanato Group to capitalize on favorable secular tailwinds, such as aging populations with more complex health conditions, pharma innovation, particularly in the sensitive biologics, and the trend towards the self-administration of medicines. We operate in growing end markets and we are well positioned in the fastest growing biologics segment. We believe we have a leading presence in GLP-1s, underpinned by long-term commercial contracts and we see many opportunities primarily in biologics over the next several years. Above all, our global footprint, differentiated product portfolio and integrated end-to-end solutions offer customers a unique value proposition. This provides us with sustainable competitive advantages. I will now hand the call over to Marco.

Thanks Franco. Before I begin, I want to clarify that all comparisons refer to the first quarter of 2023, unless otherwise specified. Starting on page 7, for the first quarter of 2024, revenue decreased 1% and 40 basis points on a cost and currency basis to 236 million. The biopharmaceutical and diagnostic solution segment grew 2%, which partially offset the expected decline in the engineering segment. The revenue decrease in the first quarter was mainly driven by lower revenue related to glass vials in the BDS segment, due to the industry-wide stocking, which we believe is transitory. Our product diversity helped expand our mix of high-value solutions, which represented 37% of total revenue in the first quarter. However, the product mix within high value solutions was less accretive compared with the same period last year, mainly due to lower volumes from easy fill vials. For the first quarter of 2024, the lower revenue from easy fill vials was the largest factor in the gross profit margin decrease to 26.4%. In addition, the underutilization on vial lines lower gross profit from the engineering segment. Temporary inefficiencies in our new manufacturing plants and higher depreciation also impacted gross profit margin, but to a much lesser extent. Lastly, the prior year period also benefited from government grants that help offset the spike in the utility costs that did not repeat in the first quarter of 2024. This led to an operating profit margin of 10.7%, and on an adjusted basis, operating profit margin was 12.3%. For the first quarter of 2024, net profit totaled $18.8 million, and diluted earnings per share was $0.07. On an adjusted basis, net profit was $21.5 million and adjusted diluted earnings per share were $0.08. Adjusted EBITDA was $50.6 million and adjusted EBITDA margin was 21.4%. Moving to segment results on page 8. For the first quarter of 2024, Revenue from the BDS segment increased 2% to 198.9 million. Segment growth was impeded by the industry-wide vial destocking, and in the first quarter of 2024 revenue from vials decreased 43%. This was offset by strong growth in syringes and other product categories. High-value solutions grew 15% to $88 million in the first quarter, while revenue from other containment and delivery solutions decreased 7% to $111 million. For the first quarter of 2024, the change in product mix due to the lower revenue from easy-fill vias had the most profound impact on gross profit margin of 27.1%. The gross profit margin was also tempered by the underutilization of vial lines and associated labor costs, the temporary inefficiencies from startups, higher depreciation and government grants that did not repeat in 2024. As a result, operating profit margin for the BDS segment decreased to 14.1%. For the first quarter of 2024, revenue from the engineering segment decreased 13% to 37.1 million due to lower sales from pharmaceutical visual inspection and assembly and packaging lines. As previously discussed, our main priority in 2024 is executing the large volume of work in progress and shortening our lead times. We have hired additional labor resources to support these efforts along with other important long-term projects in the pipeline. In the first quarter of 2024, gross profit margin from the engineering segment decreased to 17.3% due to lower marginality from certain projects in process. This led to an operating profit margin of 6.7% in the quarter. Please turn to the next slide for a review of balance sheet and cash flow items. In March, we closed our follow-on offering and raised net proceeds of 170.5 million. The proceeds will be used for our capital investment projects, working capital needs, and general corporate purposes to ensure an appropriate level of operating and strategic flexibility. With the cash infusion from the offering, we ended the quarter with cash and cash equivalents of 186.3 million, and net debt of 186.9 million. We believe our cash on hand gives us adequate liquidity to fund our strategic priorities. As expected, capital expenditures for the first quarter of 2024 total 71.9 million, with approximately 88% tied to growth investment to advance our ongoing capacity expansion for high value solutions. We continue to carefully manage trade working capital to support the growth of our business. In the first quarter, we benefited from strong collections of receivables, which drove cash generation. But, as expected, our inventory levels increased in the first quarter mainly due to the establishment of baseline inventories in our new plants. which includes products that are expected to be delivered to customers in the future quarters. In the first quarter of 2024, net cash from operating activities totaled 71.6 million. Cash used in the purchase of property, plant and equipment and intangible assets was 102.7 million. This drove negative free cash flow of 30.6 million in the first quarter. Lastly, we are updating our full year 2024 guidance on page 10. As Franco mentioned, the combination of temporary soft vial demand and the postponement of a large customer order are the main reasons for taking a more cautious approach to our 2024 guidance. Our guidance now assumes a more gradual recovery in vials. We currently expect that vial orders will increase at the end of 2024 and into early 2025, with bulk vials expected to recover first. While our recent public offering had limited impact on dilution in the first quarter, our updated guidance includes the increase in weighted average shares outstanding. For fiscal 2024, we now expect revenue in the range of 1,125,000,000 to 1,155,000,000. Adjust the bid in the range of $277.9 million to $292.2 million and adjust the diluted EPS in the range of $0.51 to $0.55. Thank you. I will end the call to Franco Moro.