Good morning, everybody. Welcome to the CJS Securities 25th Annual New Ideas for the New Year Conference. I'm Larry Solow, a research analyst and partner here at CJS. Thank you, everybody, for joining. Since it's the first meeting of the day, I'm just going to briefly remind everyone of the format for our conference presentations. We'll start with a 15-minute or so overview for management. Following that, we'll open up the floor for a Q&A, which I will moderate. Please feel free to submit any questions you might have through the portal, and I will be happy to weave them into our conversation. Great. With that said, I'm happy to welcome Stevanato Group today to help kick off our conference this morning. With us, we're happy to welcome Franco Stevanato, Chairman and CEO, Marco Dal Lago, CFO, and Giacomo Guiducci, who's part of the M&A and Alliance team and also works for the Investor Relations Group over there at Stevanato. Great. Franco, please go ahead. Thanks. Thank you. Thank you, Larry. Thank you to your company for hosting us in order to present Stevanato Group. Good morning and good afternoon, everybody. Let me start to introduce Stevanato. Stevanato is a company that has more than 75 years of history in the pharmaceutical industry. Our business model in the last years has created a foundation for long-term sustainable growth. Our business fundamentals are strong. Leveraging our 70-year history of excellence, we have delivered in the last year consistent growth and position Stevanato Group as the leading player in the industry. For more than 20 years, Stevanato Group has delivered steady double-digit revenue and marginality growth, driven mainly by demand for our high-value solution. Our unique value proposition provides us with a strong competitive advantage to meet the increasing demand driven by secular tailwinds in high growth end markets such as biologics. Our demand-driven capacity expansion projects are progressing as planned, and we are in an excellent position to keep growing this business for many years to come. If you can go to the next slide. At Stevanato Group, we look at our business as a single value proposition delivered through two segments: Biopharmaceutical and Diagnostic Solutions business that represents 81% of our revenue in 2023, and Engineering, which is 90% of our revenue. For our customers, we offer solutions by combining products across these two segments to create a powerful combination of end-to-end solutions. Starting on the left, we have a full portfolio of pharmaceutical glass products, including cartridges, vials, and syringes, which is our core market where we offer a wide range of performance levels. Our portfolio of high-value products, where we have actually the highest marginality, like Nexa, Alba, EZ-fill, meet the most stringent performance and quality requirements of biologics. In drug delivery devices, we offer a full range of our IP platform solution, in particular for offering pen, auto- injector, and wearable devices. Our engineering segment includes manufacturing lines that range from glass forming to visual inspection to assembly and packaging of devices. Our range of products is supported by our scientific analytical service with our Technology Excellence Center in both Europe and the U.S. in Boston, where we are working with clients in the very early stage of their pipeline and development activities. This unique offer means that we are with our customers for the entire drug life cycle, and in many cases, that can last decades. Our solutions are built into the regulatory filings, like the Drug Master Files, which means that we have a long-lasting customer relationship where switching costs are extremely high. Next slide. Our wide range of capabilities and expertise, combined with our expanding global footprint, will help us meet growing customer demand. We are targeting high growth end markets where large-scale macro trends are driving demand growth, especially for high-value products. The biggest of these trends are aging population, increasing prevalence of chronic disease, and expanding access to healthcare around the world. Alongside that, there is considerable growth in biologics and biosimilars that have more sophisticated packaging delivery requirements. Next, increasing self-administration and the movement of healthcare delivery from hospital to home environment are driving the need for high-performance containment delivery solutions. Finally, biopharmaceutical companies are choosing to outsource non-core capabilities, allowing them to focus on drug development. All of these factors are driving demand for our products and services. We are well-positioned to capitalize on these secular tailwinds thanks to our unique integrated value proposition. Next slide, please. We have a global diversified manufacturing footprint. Through 16 sites in nine different countries, we offer our customers outstanding security supply while high-quality standards from all the plants, and we offer a scientific analytical service at our tech center in Boston and in Italy. Today, we are focused on building our new facility in Fishers, Indiana, and expanding our capacity in Italy into different locations. All this acceleration is driven actually by customer demand for our high-value solutions, in particular in biologics space. Next. With this, Stevanato Group is strategically operationally positioned to capitalize on these trends and turn them into growth drivers for our business. We are expanding our industrial footprint to meet increasing demand, enhance our proximity to customers, and provide customers with redundant localized supply chains. Our priority capital investments are targeted at increasing our capacity for high-value solutions, which is where we see the most demand in the market. We continue to invest in research and development organically, but also via partnerships to drive innovation across all elements of our solutions: glass, devices, engineering, and process automation, and we are building a pipeline by partnering with most of our strategic customers, as well as emerging biotech companies, to bring to market a number of new programs and assets that will support our growth for the year to come. Most of them are again linked to our new portfolio of high-value solutions. This is a crucial moment in the pharmaceutical industry and for Stevanato Group in particular. For us, this is the moment decades in the making. Over the last two decades, we have experienced double-digit growth, but we have also brought together an extraordinary leadership team, developed an unmatched technical expertise, and built the infrastructure to take us well into the future. The biologics market is set to grow exponentially in the years to come, and we will work side by side with our customers to help them make the most of this growth. Our ambition is to be a partner of choice for the biopharma industry, and we are laser-focused on delivering to our customers, our shareholders, and patients all around the world. Thank you. We are waiting for questions, Larry. Great. Thank you very much, Franco. That was a good intro. I'm going to go ahead and kick off the Q&A, and I will moderate this. And as a reminder, folks, please don't hesitate to type questions into the portal, and then we'll be happy to ask those questions. Great. First, to start, Franco, Marco, we're asking a few general questions to all our presenters this morning just to get a feel for certain things. And just for you guys, in general, just from a high level, can you just discuss sort of the specific milestones? Maybe there's one or two large things out there or catalysts this year that could help the stock on the upside. And then on the flip side, what are a couple of things, risks, or maybe just concerns you have? Again, these are just high-level general thoughts to kick off. Yes. In terms of milestones today, we have a clear priority, Larry, in Stevanato Group, that is the ramp-up of the new greenfield plants that we are building in Europe, in Latina, and in Fishers. Today, there is a big focus organization. In fact, we set a clear top-level priority in order to ramp up, execute, install capacity to do the validation because we have a clear commitment and contract with our customers, in particular in order to deliver syringes, Nexa, and also to do a particular program of installing line and hiring and training the people. This is where particularly the organization is fully focused in this moment because it will be fundamental in order to succeed the budget for 2025. In terms of concern, I will maybe rephrase. It's not really a concern, but the big point of attention is regarding the recovery of vial demand. We came from two years where the demand for vial was extremely soft and low. Today, we are starting to see positive signals in all the market, both small customers and big customers that are starting to recover the demand so today, we have several plants all around the world, Larry, that produce vial bulk and cartridges bulk. What is related to the vial bulk? Today, we are starting to reactivate the line, rehiring people in order really to fulfill this increase in demand so this is where the company is laser-focused today in order to move in this program of gradual normalization of the vial demand. The second point where today the organization, like I mentioned to you, we have two divisions. One is the biopharma division, one is the engineering division. In the engineering division, under the new leadership of Raffaele Pace, there is a clear program in order to go in terms of normalization, in terms of revenue marginality, and delivery of the line. We came from three years where there is a big increase of revenue, but also the complexity has caused in 2024 some delay in certain customers, in particular for complex programs. Today, we are on track, but there is a clear program to go back within the next two quarters in a sort of normalization. This is where we are today, and we are really focused and committed. Gotcha. Great. Okay, great. I will certainly come back to a couple of those topics in terms of the vials and the engineering piece. Maybe just a couple more on the more general and maybe a couple for Marco since he's on the line as well. I guess lots of talk, especially on tariffs. I don't know if you guys are prepared to talk about specific impact, but just can you maybe just discuss from a high level how you're preparing for a potential uncertainty on the tariff front or if there will be an impact? Obviously, you guys are global, so maybe you can kind of just give us a little color on that. Right, Larry, our approach is not certain now, obviously, with the current situation, but we like to be close to our customers. That's why we have this global footprint, and more and more we are increasing capacity in Fishers and rapidly ramp up for our high-value products, and this is obviously mitigating the risk related to tariffs, for example, but it's the same also for currency exposure, where in the past, we were naturally exposed because the industrial footprint for high-value products was only Europe, and the U.S. is an important market for us, so we were naturally exposed to U.S. dollar. Again, with the ramp-up of Fishers, we have the possibility to work locally and mitigate the exposure together with other tools we have in place, like a very strong hedging policy that is working quarter after quarter and mitigating the risk of exposure we have. But we tend to be as much as local as possible in serving our customers. Right. Okay. Great. No, I appreciate that. Okay. How about just a couple more company-specific questions? Franco, you mentioned obviously some issues with the vials. Maybe we can take a step back and just talk about your sales growth from 2013 to 2023. You grew segment sales on the biopharmaceutical and diagnostic solution segment well into the double digits. Maybe you could just discuss some of the key drivers behind that growth and then give us a little more color as to what kind of caused that slowdown in 2024 and then where we stand going forward? Yes. Okay, Larry. So we came from, let's say, 20 years where Stevanato was always able to deliver double-digit growth. The main axis of this big growth was the fact that we decided at a certain point to become a global partner for the pharmaceutical company. 20 years ago, we used to have only plants in a few locations in Europe. Today, we have a global footprint worldwide. This has allowed Stevanato to be perceived like a global partner for the top 25 global key customers worldwide and also to become domestic in a major region all around the world, in particular Europe, U.S., and Asia, Latin America. So the fact that we have decided to invest in the different major pharma regions has allowed us to be perceived like a global partner, increase market share rapidly. On top of this, in the last also 15 years, we increased a lot of our research and development spending. So we moved to being a normal bulk supplier of glass. But thanks to all the patents that we have developed in terms of EZ-fill syringes, vials, cartridges, the fact that we developed also our set of IP around devices allowed Stevanato to enter in what we call the high-value solution market, where customers are asking more value than pieces. Through this increase in market, that we know that we are now close to 40%, 39%, or 38% of our total revenue, high-value solution was a big boost in order to increase our revenue and our marginality. So this practically is the journey of last year from local to global, from component to the full system. In 2023, in 2024, so we moved in a sort of single digit for just one main reason: the stocking. And the stocking was very painful for Stevanato or vial, I mean, in 2024 because the customer between 2020, 2021, a little bit of 2022, they built a huge stock for the COVID treatment for vaccine. And today, from the end of 2023, 2024, they moved with a big exercise of de stocking. So this is the reason why our high-value solution program, in particular syringes, they growth in 2024, but it was compensated at the fact that we have a big drop on demand on vial. This is the reason why it's the first year in the history of Stevanato that we deliver single digit in our growth. Okay. And the situation, maybe we can elaborate a little bit more on the vial situation. What created the sort of oversupply on that side? And you guys were, yeah, go ahead, please. So the situation is this, Larry. We are starting to see positive signals in a different market, starting from already in the second part of the year. We start to see small customers, in particular localized in Latin America and Asia, that they move with a more what we call normalized order. And in parallel, big multinational, big global key accounts, they were still low in terms of order in 2024, but they start in the Q4 or last year to share new, what we call normalized forecasts starting from Q1 or Q2 or 2025. So let's make an assumption. The vial market is a market that has a size of approximately 13 billion unit consumption per year. It's growing approximately at 1%, 2% per year. Based on this, that is still the biggest adoption for what is related to injectable. We see in 2025 that overall, the combination of small customers and big customers, we are moving into a normalization. It's not normalized yet like it was during pre-pandemic in 2019, but there are a lot of good signs and there are some improvements compared to 2024. What is important for me also to underline, Larry, one important aspect that many investors ask us is what if there is a future for vials or not. The recovery of vials from the stocking is not a reason if the vial market it will be back. It's when it will be back because the vial market, because of the supply chain configuration of the pharma company, is still the biggest way to perform injection, even more than syringes, even more than cartridges. There are several thousand filling lines installed worldwide that they can only fill via vial, so it will be and will remain one of the most stable types of consumption and adoption for what is related to injectables in order to uncertain or when it will normalize. Gotcha. And a question we get a lot, Franco, maybe you can elaborate a little bit, is on the syringe side, the conversion to ready-to-use, it's mostly the market, it's mostly converted, whereas the vials barely just touching the surface, which to us is an interesting and also a potential growth driver. What is the difference between those two markets and your optimism that vials will begin to convert to ready-to-use format? It's a process. Pharmaceutical companies, because of the investment, the validation, the registration, it takes sometimes 10 plus years in order to move from one type of primary packaging to another one. Very simple. Syringes in the ready-to-fill format, they started already more than 25 years, 20, 25 years ago, when Becton Dickinson launch the system for the ready-to-use. This is why syringes today, more than 95%, close to 98% of the adoption of syringes is on the ready-to-fill configuration because they start just more than two decades ago. Vial, we just started a few years ago, and it's just a reason of timing. Today, compared to the syringes, the vial market, there are already, like I mentioned to you, several thousand of existing bulk filling lines to the pharmaceutical company. It's also true that today, more than 20%-25% of this line have already closed what we call in the pharma company the amortization cycle. So it's just a reason of timing that the adoption of pharma customers from bulk vial to EZ-fill, it will be in combination when there will be the new line or when they will be obliged for quality and compliance point of view to purchase the new line. So it will take years, but we see a sort of parallelism between what's happened on syringes 20 years ago or what we will see in the next 10 years on vial. It's just a reason of time on the conversion. Gotcha. Okay. And taking a step back, can you maybe just discuss the competitive environment, both on the bulk side and more for you guys on the higher value solution side where as we go up that value curve, has this changed much in terms of the competitors out there? Just maybe you can discuss that for the dynamics? So today, what we see, Larry, that the more we move into the high-value solution, no matter if it's on the EZ-fill product or drug delivery system, we see that there are more and more sort of selection of very few measured competitors recognized by the pharma company. For the simple reason today, the pharma organization has become even more bigger, complex, and global, and their quality requirements, when they're going to choose, select some partner, the partner must have certain characteristics, global footprint with one high-quality standard in order to enhance the best quality for their patient. They are looking for partners also with strong financial resources in order to further reinvest in capacity and in research and development and with a full set of product portfolio for injectable. This is the reason why we see that Stevanato is well positioned because we are investing, we invested more than $1 billion in last year in order to build capacity to further increase our AP. And this is moving Stevanato always between the top three players in everything we do. We are market leader on cartridges today, a market leader worldwide on cartridges ready-to-fill. We are market leader on EZ-fill vial, one of the biggest two players. We are the second player recognized on syringes worldwide, and we are active in building IP around our device. So we see that there is more and more the tendency from the big pharma company to select a big player with this type of characteristic. Gotcha. Great. Another question we get, Franco, a lot. It's just your exposure to the GLP-1 space. Can you just discuss sort of your end markets? What's driving your growth and your favorable outlook? Clearly, it's not just GLP-1, but maybe you could just kind of discuss the other areas that are really driving growth and demand for your packaging. Yes. Today, we can say practically most of our growth, Larry, is based on our high-value solution that is strictly connected to the capacity that we are building up between Europe on EZ-fill product and in Fishers. In particular, on syringes Nexa, in particular, in the future, it will be cartridges ready-to-fill, Alba syringes, and also for vial ready-to-fill. So the measured therapeutic drugs that we are growing today are in biologics like monoclonal antibody, particular technology for ophthalmic, and also including the biosimilar and GLP-1. For what is related to GLP-1, like we already mentioned to most of the investors, we are the historical partner of the big insulin player worldwide. So we started at the end of 1990 to serve to this customer vial and cartridges for the insulin. So, when approximately 10 years ago, our big customers, they involved us through our tech center in order to develop their molecule. Practically, they have selected Stevanato also for GLP-1 in which type of primary packaging configuration. It's syringes, Nexa, syringes with double-chamber bypass in ready-to-fill cartridges, and also through our engineering division, where we are involved in order to deliver a special machine, high-speed machine, and this new sophisticated complex line for assembly for device. So we can say that practically all our portfolio of product in terms of product and process is where we are involved in this opportunity of GLP-1 also. Franco, just to complement, I will not forget the drug delivery system opportunities we have in front of us in biologics and GLP-1. Correct, Marco. On devices, we have developed our R&D on pen auto-injectable wearable devices. Today, in 2025, there will be not a really big visible revenue in our P&L around this, but we have an active pipeline with our customer, and we are building capacity in Germany and in Fishers in order to sell to our biopharma customer also this type of configuration, both on pen, both also in auto-injector and in wearable device. But the big real revenue, we will see more in the second part, 2026, 2027 timeframe that we will ramp up this high-speed machine that we are installing. Gotcha. Okay. I appreciate that, Franc o. How about we switch gears real fast? We got a few minutes left on the engineering segment. Maybe you could just from a high level, give us a real brief on what the engineering segment does, the competitive advantages it gives you, and just a little more color on sort of the slowdown in 2024 and where we stand today, some of your initiatives that kind of help remedy these issues? Practically, in Stevanato Group, we decided to develop internally the technology more than approximately 40 years ago because we were looking to be different and not standard compared to our competitor. At that time, there was approximately 200 converting companies in Europe all having the same technology. We decided to develop our own technology that enhances to us higher time to market, fast time to market, productivity, reducing cost, and also increasing the quality. This was still today one of our internal competitive advantages, the fact that we develop, we own the technology in order to tailor-make our product for our customers on glass, EZ-fill, and also on device side. It's also true that the engineering division in the last 15 years, thanks also to the two M&A that we have done in Denmark, we have extended, increased our revenue to our pharma customers, in particular for special machine and for assembly technology for devices. In the last approximately three years, last three years, the company more than doubled the revenue because of the big increase of demand for special machine and big increase of demand for this new complex high-speed line for assembly technology. Last year, in particular, in the plants that we have in Denmark, we had some difficulty to deliver on time, in particular this complex line, just for the reason that we have the new prototype line for our big customer. Now, where is the situation? We postponed in the second part of last year certain revenue, and this has caused us also some delay in terms of revenue. Now, we have reviewed our project management. We have resized and balanced our size of operation in Denmark and in Italy, and we are going back to a normalization. Even more, we are building the floor, Larry, for the next growth in the next years because the market of engineering today, the demand is robust. There are more and more increasing demand for special machine due to the Annex 1 requirement, and there are more and more requirements for this high-speed line for auto-injector because the market of biopharma is adopting the auto-injector. Gotcha. Okay. Great. And you mentioned Annex 1, Franco. Maybe we can discuss that a little bit, basically, which is, or more broadly, just tightening regulations on drug packaging quality centered around the Annex 1. And maybe you can just give us a little brief background on that and what is that doing for demand for your products? Is that more? And And I know there's lots of talk, maybe you on some of these legacy products too could convert, which could add an extra leg. Maybe you can discuss a little bit of that too. Great. Thanks. Yes. Larry, around Annex 1 new requirement, practically what is behind both the supplier and the pharma company, they have to put in place process and product that have to really enhance no risk of sterility for the drugs in order to avoid any risk for the patient. So there are many lines installed worldwide where there's some difficulty in order to satisfy this requirement. So practically, what is doing Stevanato Group? We are promoting our what we call EZ-fill solution, particularly for vial, because this is going to enhance the pharma company to buy what we call this new very high, flexible, sophisticated line where the customer is going to avoid handling, washing, siliconization, sterilization, where there is the higher risk of contact of the glass with the metal. Through this type of EZ-fill configuration, the customer is going really to receive this very elegant nested tub, perform the filling, do the labeling, and then ship to the patient. This is where we are capturing everything that will be more market opportunity for our EZ-fill product in the next years. In parallel, also, there are opportunities for our engineering division for what is related to the special machine because our new technology for inspection has particular, let's say, algorithms, artificial intelligence that allow the customer to reduce any risk of false rejection rate or any risk of external contamination in the drugs. It's where in the medium term, we count that they will generate more revenue for Stevanato Group thanks to Annex 1. Gotcha. Great. Okay. We have a couple of minutes left. Marco, maybe we could shift gears to you for a couple of questions. Balance sheet is in fairly good shape, pretty modest leverage. What's sort of your outlook? Obviously, we know free cash flow has been impacted the last few years. Somewhat of a cash flow problem as you build out capital expenditures and capacity. Can you give us just a brief high-level outlook where we stand on the capacity build-out outlook for capital expenditures going forward and when free cash flow may turn positive? Yes. Thank you, Larry, for the question. As you said, the main driver of our negative free cash flow in the recent year has been driven by CapEx. Consistently with the pre-IPO plan, we went through a significant cycle of CapEx to establish the global footprint, especially in value products. For the future, we are not disclosing today the guidance for 2025. We will do it basically in less than two months. What I can tell you is that we already reached the peak of the CapEx back in 2023. We are now entering progressively into a more normalized phase of CapEx, and with that, our plan is to keep on improving our free cash flow. Obviously, we keep our eyes open to take the opportunities we can have in high-value products. What is important to underline, in my opinion, is that we are investing in high-value products, and a big portion of the capacity we are installing is covered for the next year from long-term contract with key players in the industry. So as long as we have a high return on our CapEx, we believe we can invest and take the opportunity to keep on growing in this good environment for us. And as you said at the beginning, you are right. We have flexibility in our balance sheet. The leverage is 1.1, 1.2, so we are not so leveraged. We still have a small floating in the market. So looking at longer term, we have the flexibility to leverage the growth in this important environment with lots of opportunities in biologics. But, Larry, if you allow me another 30 seconds, if you allow me to go beyond 2025, you see we already shared that the challenge that we face, temporary challenge in 2024, like the vial stocking, the big cycle of investment that we are performing today to greenfield plants that we are investing a lot of money, but there were not clear revenue, and we have put a lot of effort in order to put the engineering under control. But what is important to underline is that there are a lot of positive macro trends that will support Stevanato with a very optimistic view in the next years to come. Make an example. When the vial stocking is improving, it will be behind us. We will continue to gain leverage from our new greenfield plants in Latina and in Fishers, and also we are starting to see strong demand for engineering. This gives us the confidence in our ability to achieve our double-digit growth in next years, our target of 30% EBITDA in 2027, and to move our percentage of high-value solution between 40%-45%. So we confirm that in the future, there are a lot of tailwinds that we support in biologics, Stevanato to continue to be back on double digits. Great. You know, with that, that's great. I was going to ask you for some closing remarks because we're just about out of time, but I think you summed it up really well there, Franco. I want to thank everybody for joining. Have a great and productive rest of the day, and we'll speak to everybody soon. Thank you, everybody. Thank you, Larry.