Stevanato Group S.p.A.

Good afternoon, this is the Coruscall conference operator. Welcome and thank you for joining the Stevanato Group first quarter 2025 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, 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 De 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 20F 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 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 Stevinato for his opening remarks.

Thank you, Lisa, and thanks for joining us. Today, we 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 diagnostic solutions segment. This helped offset the anticipated soft performance in the engineering segment, as we continue to execute our business optimization plan. This solid performance in the BDS segment was driven by the expected improvements at our Latina and Fisher 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 the easy-fill bias. 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 the stocking 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 mid-year. 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 continued to improve for both final factor acceptance and site acceptance testings. 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 were ramping up ranges 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 US. I recently returned from Fishers, where activities are in high gear. Today, we are in the early phase 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 come 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 chains, procurement and other initiatives. Based on recent discussions with customers, alongside thorough analysis and a 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 localised 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 US. We do not expect that tariffs will affect our competitive positioning. On the contrary, we believe our ongoing investment in the US 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 cost and currency basis to $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 110.3 million and accounted for 43% of total revenue. This was driven by continuous strong demand in high-value syringes, increasing capacity in latina and fissures, and the partial recovery in easy-fill vials as the stocking 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 multi-year investment plan, including device counter-manufacturing activities in Fishers. While the two sides 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 easy-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 26.5 million and diluted earnings per share were 10 cents. On an adjusted basis, net profit was 28.1 million and adjusted diluted EPS were also 10 cents. Adjusted EBITDA was 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 220.8 million on both a reported and constant currency basis, driven by strong growth in high-value syringes and, to Elixir's stand, other product categories. During the quarter, we also saw continued stabilization in vial demand, as the effects of this stocking began to gradually ease. High-value solutions grew 25% to $110.3 million, representing approximately 50% of segment revenue. Revenue from other containment delivery solutions totaled $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 easy-fill buyers. 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 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 after sales 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 prioritized the completion of the legacy projects in Denmark. As a result, operating profit margins 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 90.7 million and net debt of 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 69.7 million, with more than 90% tied to growth investments to advance our ongoing capacity expansion for high value solutions in fishers and Latinas. 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 replenished inventories that fell in the fourth quarter driven by strong sales. In the first quarter of 2025, Net cash from operating activities increased to 99.8 million. Cash used in the purchase of property, plant and equipment and intangible assets was 71.8 million. As a result, we generated free cash flow of 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 analyzes 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 US, the absorption of price increases from suppliers, and no change in the US policy. Based on these assumptions, we estimate a tariff-related impact of approximately 4.5 million to operating profit, or approximately one cent 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 these efforts 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 1,160,000,000 to 1,190,000,000. And we now expect Adjust the EBITDA between $288.5 million and $301.8 million and adjust the diluted EPS between $0.50 to $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 digit, and the engineering segment is expected to be neutral to low single digit growth. I 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 aging strategies have limited our exposure. and we assumed a EURUSD 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 infebrile impact from tariffs of 4.5 million euro of operating profit or approximately 1 cent of diluted earnings per share. Thank you. I will hand the call back to Franco.

Thank you, Marco. In closing, we had a solid start to fiscal 2025, with strong momentum in the BDS segment as we advanced progress at our Latina and Fisher sites and increased our mix of high-value solutions. We are also encouraged by the continued stabilization in the buyer market demand as the stocking fades. 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 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 favourable secular tailwinds, from ageing populations with increasingly complex health needs to pharma innovation and a shift towards self-administration of medicines. These strengths 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.

Thank you. This is the Coruscall Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. We kindly ask you to limit to one question and one follow-up only, and join the queue again for any further questions. We will pause for a moment as participants are joining the queue. The first question is from Matt Larry William Blair. Please go ahead.

Thank you for taking my questions. 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 medications 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 sales people, procurement people, legal, finance, and supply chain. we play different scenario obviously our our guidance is embedding tariffs to our customers also impact on supply chain and procurement and it's including finished product raw material and semi-finished products we are planning to transfer a niger price to most of the customers the impact Nevertheless, we see some impact in supply chain, either in production or in procurement, in purchasing. And so this is the estimation about the 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 about the U.S. footprint, we want to remind we have also a factory in California, in Ontario, so the combination of Ontario and fishes are partially offsetting the impact already. And as you know, with the ramp up of fissure, we estimate that we will further mitigate in the future.

Correct. And fissure in 2025 is going to partially absorb this tariff impact because the focus on 2025 of fissures is to ramp up capacity with our customer without in order to execute the actual control that we have but we are still in the phase that we are installing high speed line particular force ranges in the medium term fisher it will be a nice tool for standard group in order to compensate this tariff

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

Correct. We continue to see positive signal in the market. Practically all our customers, both the regional customers are spreading all the region, in particular the global key account, they are starting to increase their order. If you compare 2024 with 2025, our order intakes grow in double digits, both for bulk buyer and ready-to-fill buyer. And in fact, we are starting to activate the via lines practically in all our plants worldwide. So from our viewpoint, this recovery is really moving in the right direction for all the 2025 in order to go to a normalization in 2026. So we are happy for this.

And we are reiterating our guidance with respect to bias. So we expect a mid single digit to high single digit growth in 2025 compared to 2024 with sequential improvement throughout the year. Okay, thank you.

You're welcome.

Next question is from Paul Knight, KeyBank. Please go ahead.

Congratulations on the quarter. Ultimately, Indianapolis and Latina, what's the revenue potential going to be from those sites, whether it's five years from now, three years? I'm assuming it's just starting early days of revenue now, but what's the potential of those two sites?

So, Paul, Franco speaking. Today, one of the major contributors of our growth in 2025 is thanks to the greenfield plants in Latina, in particular also on fishers. We always share with you that in fishers, we have planned to invest half a billion euro that had to be fully ramped up at the end of 2028. Our goal is to generate half a billion euro revenue thanks to this investment that we are doing in Fisher. We always want to remind you that our ratio is for high-value products, one euro cap has to correspond to one euro revenue.

And are you – how do you feel about Latinas?

Athena 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 line. And also, we have an intense program of validation for our international customers. And on the 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 2027 in commercial production and revenue.

And Marco, what will CapEx be in 2025? Thank you.

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

Thank you. Welcome.

Next question is from Michael Riskin, Bank of America. Please go ahead.

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

Yeah, I think you fully got the point, Marco is speaking.

First of all, we are assuming our guidance this year based on the current situation of tariffs with 10% current tariff from EU to the US.

You know, there are different scenarios in front of us with respect to that. Nevertheless, the number one mitigating factor will be the ramp up in fishers. We are generating currently about 25% of our revenue in the US, but we expect with fishers in Ontario to mitigate a lot in the future. Okay.

And then on the engineering segment, you called out that the gross profit margin was lower and the 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, in the second half? When will it sort of bounce back to more historical levels in engineering? Thanks.

I can start from business point of view and execution point of view. So today the organization is fully focused to execute and deliver this complex program for our biggest customers that we are producing in and delivery from the plants in danmark we are on track to complete it within all the 2025 but the majority of this complex program we are target to deliver in media this is where the organization is working hard in parallel we are working on what we call this an operational and optimization plan where we want to balance the production in order to mitigate the risk between danmark And in Italy, we are adding more and more capacity for assembly inspection machine from our plants in Italy in order really to make more center of excellence. Also, this plant is on track. Today, the organization, like we shared in the last quarter, is fully focused in order really to reinforce our leadership team, our project management, and to have two big hubs in Denmark and in Italy in order to be equivalent to serve this line.

Yeah, 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 we 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 of gross profit margin.

It also adds another color from a customer point of view. 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 their bioproduct where this assembly technology in order to serve their growing demand for drug delivery system 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 other orders in the future.

Great. Thank you.

Next question is from David Windley, Jefferies. Please go ahead.

Hi. Hopefully I don't create an echo here if I dialed in wrong. But thank you for taking my questions. I wanted to ask around the vial recovery but kind of packaged within the HVS margin driver. So certainly you're highlighting HVS vials, easy fill vials improving. We were under the impression that maybe standard vials were going to come back first or bulk followed by easy fill. So am I hearing that easy 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 is speaking. So first of all, we are happy in Q1. We got double-digit growth in harvest intake compared with the same period last year, both in bulk and sterile fires. uh in q1 the in revenue increase was modest nevertheless we generated better profitability in q1 mainly for two reasons one is the good margin we generated in in easy fill and very important also we are starting reactivating many lines around the world and is helping us with the coverage of fixed expenses also in bulk so the combination of the two is making us more more happy obviously than one year ago but we don't see any change in the trajectory throughout the year is confer what we said a couple of months ago

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

Okay. 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?

We disclose biologics that is 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. Maybe Franco can give you more color about the market.

Correct. We already shared with you that we have already signed multi-year contracts with our historical INSULIN CUSTOMER THAT WE ALREADY HAVE ESTABLISHED A VERY GOOD RELATIONSHIP SINCE PRACTICALLY 20 YEARS AGO. THIS CUSTOMER HAVE ENGAGED US FEW YEARS AGO THROUGH OUR TECH CENTER IN ORDER TO START TO VALIDATE OUR PRODUCTS IN THE MOLECULES. TODAY THE CONTRACT AND WHERE WE ARE BUILDING CAPACITY THROUGH OUR PLANTS IN EUROPE AND UNITED STATES ARE FOR BULK CARTAGES Nexus syringes, Nexus syringes double bypass, also VIA, and also we have a program, a big program for cartridges ready to fill. On the top of this also, we signed a big program for device, and this is why that in fissures, we're going also to add capacity for our drug delivery system. We'll be able to serve Nexus syringes and also these devices. From an engineering point of view, our customers are engaging us on high-speed machines for assembling and also special machines. So, practically, all our product portfolio is involved in these new tailwinds.

I'll leave it at that. Thank you. You're welcome.

Next question is from Doug Schenkel, Wolf Research. Please go ahead. Dog research. We've lost the line. Next question is with Teja Sevan, Morgan Stanley. Please go ahead.

Hey, guys. Good morning and appreciate the time here. Franco, or perhaps Marco, just a point of clarification to an earlier question. To what extent are you baking in mitigation benefit in that 4.5 million euro 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 4.5 million?

Yes, it's a good interpretation. For example, we have a global footprint.

We are producing finished products from many locations. around the world so we can have some also logistic optimization in order to minimize the tariff. But this is just an example. The task force is really active in detecting farther initiative in order to minimize the impact of tariff. 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, acknowledging that pharma doesn't want to cut cost as it relates to CDMO vendors, do you see an opportunity for 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 Stevanado to gain wallet shares specifically because of what's going on with tariffs and the push for pharma for, you know, 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.

Yeah, so the question is basically around, you know, 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, you know, 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 Parma customers are working with today because of the noise around tariffs and U.S. reshoring?

Practically, if I fully understand your question, today, tariff is going to give to Stevanato a small pain in 2025 that we already captured with this 4.5 million that Marco shared. 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 that will be able to serve the U.S. market for strangers for Nexus Arranges, for Alba, for Bypass, Vial, Vial et Ophelia, today also with a big program on device, is have further rise interest for our American customer that Stevanato is the right global partner, in particular because of this U.S. plant. The scope of this U.S. plant is only to serve the full U.S. biotech market and all the international customer. So at the end of the game, short pain, but in the long term, we see much more benefit.

Okay, I'll leave it there. Thanks, guys.

Next question is from Mark Airtalk, Stevens, Inc. Please go ahead.

Good morning. Thank you for taking my questions. 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 prepared for the impact of tariffs?

Franco speaking, the way that our customers are passing the forecast to Stevanato Gruppe is in line with the past. Usually, our customer, okay, we have the long-term contract, then they move with the 12-month forecast, and then they have the one or two-quarter confirm order, usually depending on the bulk product. or easy-fill product, where with easy-fill, the order intake is a little bit longer. So we don't see any difference from the way that they're placing order. For what we see on Bayard, we, like I mentioned, we already started to see two, three, two, four last year, and increasing their forecast, and they're increasing the order intake, but this is only due to the stocking effect in the pasta. But they are in line with the pasta.

Thanks for that. And can you break out just about how much of an improvement you saw from each of the respective buckets for margin impacts that you saw for easy fill and also the rate for the new facilities, as in, you know, what percentage of the year-over-year improvement relates to the improvements in the bio document?

So I can tell you that the number one improvement is related to Latina and fishers. We mentioned many times last year that obviously with the ramp-up we generated more cost 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 generating better results than last year. generated more revenues and gross margin. The margin is still dilutive compared to the overall segment, but we expect sequential improvement as we mentioned last March.

Thank you for taking my questions.

Yeah, and then obviously the number two factor as underlined in the remark is the fact that with 43% I value solution on total revenue. Obviously, the mix is favorable and better than last year.

Appreciate the color.

Next question is from Patrick Donnelly, CT. Please go ahead.

Hey, guys. Thanks for the questions. 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 2Q, just a little context around both revs and then margins, how we would think about this 2Q and then flowing into the second half would be helpful.

Yes, we still expect like two months ago, sequential growth throughout the year. We expect overall 44% of revenues generated in first half of the year and the remaining 56 in the second half with sequential improvement throughout the year. As last time we mentioned, we also expect margin improvement throughout the year with the Latina fishes ramping up. with engineering improving in the second half of the year. And also on vias, the stocking, we expect sequential improvement quarter after quarter. So our assumption has not changed. We have some confirmation, as mentioned, for vias and the ramp-up. The second one is under our control. Matter of fact, we are reiterating our guidance. besides obviously the impact of tariffs. That is a net impact.

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 to How are you thinking about your presence in China as we move forward here?

Today, we serve this market from the existing plants that we have in Shanghai and also for what is related to easy-fill product we produce in Europe and we ship to China. Today, it is true that in 2025, also in 2026, our big focus is in ramping up Latina, even more fishers, because if you remember, originally in 2021, there was also the program to build production for easy-fill product of high-value products in China But then some of our big customers have decided to put in 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 also there is a big growth on biosimilars. But today the big focus is to execute these two huge greenfield plants in order to execute all the contracts that we have with our customers. One example is the big program from Carthage USA to field. This is a huge program. We need to be laser focused to execute with big success because there is a big contract behind it.

Next question is from Doug Shanko, Wolf Research. Please go ahead.

Hey, thank you for taking my questions, and 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 is speaking. First of all, we are reiterating our revenue guidance. We see there two opposite effects. On one side, we see some headwinds related to the exchange rate. You know, euro went stronger compared to a couple of months ago. And this is an headwind. On the other side, one of the mitigation effect tool we have for tariff is increasing price or transfer some extra cost to our customer. And this is basically offsetting the currency headwinds in the top line. The guidance obviously we are providing is obviously the best estimation we have today, and this is reflecting the trajectory we designed two months ago.

And from market point of view, The demand from our customers is robust, widespread practically in all the products. Also to be considered that we are in the middle of the construction, ramping up this huge greenfield plant 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 accelerate this ramp up because the quality is the priority number one for these international customers.

Okay, understood. Thank you for that. And then for my second question, just high level on free cash flow. This was a really strong quarter. You know, I presume some of that is timing of projects, but also the benefit of mix. Could you just comment on that a little bit more and maybe more importantly, how should we think about durability from here in terms of free cash flow improvement over the coming quarters?

Sure. First of all, we still expect 40 to 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 40 to 60 million negative free cash flow in the year.

Okay, thank you again.

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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 20 for all the 2025 practically in all our product category we see a strong momentum in the bds segment and we have we see a high interest on our high value product because the biological demands of this product from our customer is very strong With our greenfield plants, we are on track, both with installation of line and the validation with our customers. We see visible improvement from an engineering point of view, and also we are happy that finally on Vial we see a recovery. So we are fully committed to deliver the result, and also even more, we are confident in our long-term trajectory of double-digit growth, target of 30% of EBITDA, and to move to 40% to 45% of high-value products in our product. So thank you very much.

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

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