Stevanato Group S.p.A. 2026 Q2 Earnings Call

Thank you for joining us. With me today is Franco Stevanato, Chairman and Chief Executive Officer, and Marco Dal Lago, Chief Financial Officer. We have posted a presentation to accompany today's results on the investor relations page of our website, which can be located under the Financial Results tab. I want to remind everyone that 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 20-F 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 believes 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 a reconciliation of these non-GAAP measures, please refer to the company's most recent earnings press release. With that, I'll hand the call over to Franco Stevanato.

Thank you for joining us. Today, we review our second quarter performance, share an update on market trends in our two segments, including our investment projects, and discuss the current environment. Our second quarter financial results were largely in line with our expectations, highlighted by solid revenue growth and a better mix of high-value solutions that drove expanded margins and adjusted EBITDA of 26%. Revenue grew 8% year-over-year, driven by a 9% revenue increase in the Biopharmaceutical and Diagnostic Solution Segment, which offset a slight decline in Engineering Segment. Revenue from high-value solutions grew 16% and represented 45% of the total company revenue in the second quarter of 2026, driven by a 30% increase in revenue from biologics, the fastest-growing end market. Revenue related to GLPs was approximately 22%-23% of total company revenue.

As we disclosed this morning, we completed the divestiture of our California-based subsidiary, Balda C. Brewer, Inc., which specializes in contract manufacturing services primarily for consumables and point-of-care diagnostic applications. This initiative represents another step consistent with our long-term goal to continue optimizing our footprint and accelerating the transition towards more complex, differentiated, and integrated drug delivery systems. On behalf of management, I would like to thank the Balda team for their dedication and contribution to our group over the years. Demand for injectable biologics remains strong. With more than 9,000 injectable assets in the global drug pipeline undergoing clinical evaluation or registration, and more than 60% of those are biologics. Our strategy is firmly anchored in the higher value subsets of the market, and the business is positioned as a leader in biologic applications.

The rapid growth of biologics, GLP-1 therapies, and the increase in patient adoption of the self-administration of medicines is reshaping how pharmaceutical companies approach product development and commercialization. Drug delivery systems are playing an increasingly strategic role in the success of injectable therapies. As a result, we see strong customer demand for integrated solutions that combine device innovation, manufacturing expertise, and supply chain reliability. We believe our broad portfolio of drug delivery platforms and our end-to-end capabilities position Stevanato Group well to support this evolution. With this goal in mind, we are extremely happy that one of our pharmaceutical customers has received regulatory approval in several European countries for a liraglutide-based therapy that incorporates our proprietary Alina variable dose pen platform. The approval represents an important commercial milestone for our proprietary drug delivery systems and includes two Alina variants for both diabetes and weight management applications.

This important customer project also embeds our world-class cartridge technology into the Alina pen platform, harnessing the power of our integrated capabilities. Our proprietary devices are manufactured at our facility in Germany, which plays a pivotal role in serving our global pharma and biotech partners. While Alina addresses the need for a variable dose pen platform, we also see a growing market opportunity for treatments that require strict patient adherence to dosing regimens. In response to customer feedback, we recently introduced the Deora to meet this need. The Deora is a novel multi-use fixed dose pen injector system compatible with pre-fill cartridges delivering volume up to 3 ml. This new product will take time to get to commercial stage, but we see this as a promising future opportunity. Our customer needs are clear.

Point-of-care solution that enhance patient usability and adherence, de-risk supply chain, provide a better answer to new drug product requirements of modern formulation, and lastly, increase the combination product sustainability and cost efficiency profile. We believe we have the right set of expertise and competencies to support our customers with a broad and unique value proposition. Let's turn our attention to the engineering segment. We are pleased with the continued operational and financial progress in the business. Our second quarter results demonstrate that the initiatives taken under the optimization plan are yielding positive results. Overall, the operation have stabilized, and we are continuing to execute our optimization plan. As we mentioned last quarter, the teams are laser-focused on sales and marketing efforts to expand our opportunity set. We made good progress during the second quarter in winning new orders.

We are cautiously optimistic, sales cycles are longer today than in previous year. Let's turn to an update in our growth projects in the U.S. and Italy. In the second quarter, we remained focused on scaling and executing our growth investments with a disciplined approach, strengthening our operational maturity while expanding capacity to meet customer demand. Starting from Fishers, we recently completed the initial performance qualification on the first EZ-fill vial line, and we expect to launch customer validation in the near term. The build-out for our first device program remains on track, and we continue to expect commercial production to begin later this year. As these initiatives come together in Fishers, we are expanding our commercial capabilities and reinforcing our position for future growth. Turning to Latina, the syringe ramp-up is ongoing as we continue to validate new customers.

In addition, our next generation RT400 cartridge line is expected to be completed and installed in the next couple of months, with commercial production expected in 2027. In summary, our second quarter results were in line with our expectations, reflecting the continued strength of our strategy. We are positioning the business around the most attractive areas of the market, particularly biologics, GLP-1 therapies, and integrated drug delivery systems. The divestment of our Balda C. Brewer and our continued investment in platforms such as Alina and other premium products reinforces our focus on higher value, differentiated solution that address the evolving needs of our pharmaceutical customers. At the same time, we are making progress in improving the engineering segment and advancing our growth investments. I'll turn the call over to Marco for a review of our financial performance.

Thanks, Franco. Before I begin, I'd like to clarify that all comparisons refer to the second quarter of 2025, unless otherwise specified. Let's start on page 10. In the second quarter of 2026, revenue grew 8% to EUR 302 million, both on a reported basis and at a constant currency rates. This was driven by a 9% growth in the BDS segment, which offset a 2% revenue decline in the engineering segment. Revenue from high-value solutions increased 16% in the second quarter to EUR 135.9 million and accounted for 45% of total revenue. In the second quarter of 2026, gross profit margin increased 60 basis points to 28.7%. This was driven by the combined improvements in Latina and Fishers, which led to an increase in high-value solutions and improved marginality in engineering segment.

This was partially offset by the expected increase in depreciation, higher utility costs, and to a lesser extent, currency headwinds. In the second quarter of 2026, we completed the sale of our California-based subsidiary, Balda C. Brewer, which specialized in contract manufacturing services for consumables and point-of-care diagnostic application. As a result, the company recorded one-time expenses of EUR 12.2 million in connection with the sale and related transaction costs in the second quarter of 2026. This subsidiary was expected to generate revenue of approximately EUR 30 million in fiscal year 2026, and the transaction is expected to be accretive on the full year margins. The sale of Balda C. Brewer, and to a lesser extent, higher start-up expenses, unfavorably impacted the group's operating profit margin in the second quarter. On an adjusted basis, operating profit margin increased 250 basis points to 18%.

As expected, the tax rate in the second quarter 2026 was higher compared with the same period last year. As a reminder, the prior year period benefited from a tax incentive, which lowered the Italian statutory corporate income tax rate in fiscal year 2025. The incentive was not available in 2026. Additionally, there is no corresponding tax benefit on the sale of Balda C. Brewer, which contributed to the increase in the effective tax rate in the quarter. As a result of the one-time expenses related to the divestment and higher taxes, net profit totaled $23 million, and diluted earning per share were $0.08 in the second quarter 2026. On an adjusted basis, net profit increased 20% to $37.6 million, and adjusted diluted earning per share increased to $0.14.

Adjusted EBITDA increased 21% to EUR 78.7 million, and adjusted EBITDA margin increased 180 basis points to 26% in the second quarter of 2026. Moving to segment results on page 11. In the second quarter of 2026, revenue from the BDS segment increased 9% to EUR 266.2 million and grew 10% on a constant currency basis. Strong growth in premium Nexa syringes and, to a lesser extent, Alba syringes and EZ-fill vials led to a 16% increase in revenue from high-value solutions to EUR 135.9 million, which represented approximately 51% of segment revenue. Revenue from other containment and delivery solutions increased 3% to EUR 130.3 million, mostly driven by growth in standard syringes and bulk cartridges, as well as variable compensation tied to a customer contract.