Startek, Inc. Price & Performance (SRT)

We think we are off to a good start, a very good start into the year 2025 pretty much development has been as expected. That means very much driven by a very healthy business with consumables. In both divisions, but particularly in bioprocess [indiscernible] where sales revenue is up in total by 10%, but strong double digit growth in consumables, whereas the business with equipment remains rather muted as expected. And this has a stronger impact, of course, on the Lab division because this is a more general situation that we see in the industry that there is still a reluctance reluctance of customers to make larger investments into instruments, into equipment across the board, even though we have quite a lot of encouraging discussions with customers that are considering such to make such investment. On a group's level, we therefore have achieved a sales revenue growth of 6.5% in constant currencies. Book to bill ratio has been clearly above one for both divisions and therefore also for the group. The top line growth has been translated into a substantial margin expansion. Driven by scale effects, but also by product mix as our consumables business has been particularly strong, as just said.

And also previous year's efficiency program has contributed to this margin expansion. Also very positive, you will see that later, is the strong cash flow and therefore also that the leverage ratio could be reduced as planned. We also will do publish today then our quantitative guidance for the year 2025. We announced this January that we will do this alongside of our Q1 publication. And we are expecting a sales revenue growth for the group of approximately 6%. For now, we would flag that or attach a plus minus 2% bandwidth to this as still volatilities in the market globally are relatively high. For the underlying EBITDA margin, we expect 29% to 30% More details at the end of our presentation. And with this, I would like to hand over to Alexandra to talk about the Matek acquisition. Thank you very much, Johim, and welcome from my side to Sartorius conference call. I will give you some more details on the signed agreement between Sartorius and Baikor to acquire one of Baikor operating company, Martech. Matek is a leading provider of human cell based microtissues and three d models for in vitro testing to accelerate preclinical drug development processes and to reduce or replace animal testing.

Portfolio of company consists of several types of micro tissues like skin, respiratory, eyes and some others. It's also culture aware and media as well as some in house testing services and these are provided to biopharma and cosmetics companies. Plan acquisition is well in line with our innovation focused on advanced cell models along with new modalities data management and AI analytics. Matteq's leading portfolio of three d micro tissue models will help our customer to speed up in vitro test testing of drug candidates and reduce animal testing and preclinical drug development. And also providing new insights. The importance of advanced cell models even further increased after the recent announcement by FDA last week on significant policy shift aimed to reducing its reliance on animal testing for drug development and incorporating new approach methodologies. According to FDA, the animal testing requirement will be reduced, refined or potentially replaced using a range of approaches including AI based computational models, of toxicity and cell lines and organoid toxicity testing in laboratory setting. And FDA also said that they will initially focus on monoclonal antibodies and other biologics for safety and efficacy evaluations. We see that MATIC solutions are highly compatible with our LPS offering and bioelectric instruments, reagents and software.

And we'll make Sartorius a provider of comprehensive we'll portfolio consist of the cell cell analysis instrument, consumables, and AI supported data models. We also see that the coverage of customers is kind of very good between both companies. Matek was founded in 1985 and employs more than 80 people. It's headquartered in North America in Oslo, Massachusetts and they also have production site in Bratislava, Slovakia. The business will become part of our LPS division in 2020 generated sales revenue of more than $20,000,000 dollars with profitability margin very similar to LPS division. The agreed purchase price is US80 million dollars which is approximately US72 million dollars Transaction is subject to customary closing conditions, including regulatory approval and we expect closing during the second quarter of twenty twenty five. Major focus after closing will be on expanding commercial geographical coverage and as well accelerating roadmap execution and synergy build on our offering. And with this, I will give a word to Florian.

Thank you very much, Alexandra, and also welcome from my side Happy to take you through our set of numbers, which are reflecting I would say, continuation of the positive dynamics that we've seen since some time already. Sales revenue was up 6.5% in constant currencies, and 7.7% in reporting currencies to SEK883 million euros This positive development is driven by a double digit growing recurring business, which is as you know, the dominant part of our business, while the nonrecurring part continues to be soft Order intake was also healthy and grew more than sales bringing the book to bill to a number significantly above one. The positive top line development is also reflected in underlying EBITDA and underlying EBITDA margin. Underlying EBITDA grew over proportionately by 12.2% to $23,000,000 and the respective margin increased by 120 basis points to 29.8%. The margin expansion that we were able to report was driven by positive volume and product mix effects and also based on the adjusted cost base as a result of the efficiency program that we implemented last year. Also EPS grew nicely by around 21%. Let's have a look at the regional development. Where we can say that all three regions developed very positively with The Americas showing the strongest growth in Q1.

The growth in all regions was driven by consumables, while the equipment business was softer across the board. China business came in slightly below prior year Q1, but on the same level as on Q4 twenty twenty four, so stable development. And without China, the APAC performance would have been at a very healthy rate of approximately 10%. Diving now into the two divisions.

Where it's clear that it has been a very strong Q1 for BPS with sales growth in constant currencies of around 10% to 718,000,000 The growth was driven by recurring business, that showed strong double digit growth compensating for the soft equipment business. Looking at EBITDA and margin, we see underlying EBITDA growing by 717% to $226,000,000 and the margin is up by a very good 170 basis points and comes in at 31.5% in quarter one twenty five. And this was driven as I already explained, for the whole group also here by volume and mix effect [indiscernible] a leaner cost base after our efficiency program. Going now to LPS. Where we have to say that with its high exposure to the non recurring and CapEx driven business, LPS continues to be confronted with a challenging overall market situations. Sales were down 5.5% in constant currencies and 4.4% in reporting currencies. And this was driven by the non recurring business that developed negatively, while the recurring side of the business also here in LPS grew nicely. Especially our business with bioanalytical instruments is suffering in the situation where customers are pushing out their investment decisions on the timeline. This has also an impact on the margin that went down from 24% in prior year to 22.6% in Q1 twenty twenty five and the drivers here were of course the lower volume, but also mix as bio analytical instruments are quite profitable product class in our portfolio.

Let me now comment on the performance below underlying EBITDA, so deeper into the P and L and the cash flow. And as you can see, the underlying EBITDA growth of €29,000,000 in in absolute terms or 12.2% translated into an over proportional growth of underlying net profit of 21.4% reported net profit of 31.2%. Operating cash flow came in quite strong, three times as high as in 2024, or in absolute terms plus $94,000,000 And roughly one third of this increase is stemming from higher EBITDA, one third roughly from less taxes paid and one third from net working capital and other effects. And combined with the low Q1 CapEx ratio and the corresponding investment cash flow of minus $78,000,000 the free cash flow as a resulting figure [indiscernible] by 151,000,000 to 61,000,000 in Q1 'twenty five. Please do not multiply that investing cash flow of 78,000,000 by four times to come to our full year assumption for CapEx There will be some CapEx seasonality with stronger cash out over the coming quarters. We will comment on the CapEx guidance in a couple of minutes. Now, looking at the balance sheet related key figures, we first see an ongoing strong equity ratio of 38% The reduction of the equity ratio is only due to some FX effects and the approved dividends that have been offset from the equity in the accounts that we published.

Net debt slightly increased, mainly due to some non cash positions such as additional leasing contracts and accrued interest. Net debt to underlying EBITDA improved from four point zero times to 3.9x in Q1. So we are my perspective, well underway on our planned deleveraging path And as you can also see in the title, we stay committed to our investment grade rating. And with that, I would like to hand back to Joachim. Thanks, Lorian. Yes, I think one topic today, for sure, during Q and A will be the current situation regarding tariffs. Therefore, maybe just a couple of statements here. Along the slide that we have prepared. So first of all, and really, as the most important aspect, I think we do not expect any impact on our competitive positioning. That, of course, has to do with the fact that a large part of our products are a very integral part and validated part of processes that are run by our customers But at the same time, it's also important to see that also our peers are running comparable global production setups and supply chains. Sartorius has established a region for region approach since a long time with a quite well established footprint also in The U. S. And also, to some extent, in China.

But of course, nevertheless, we also have a number of mitigating measures being defined and underway which include tariff surcharges, for example, and a further shift of certain production volumes And then, of course, it's also clear to all of us, I think, that there might be second round effect, very difficult to to define them and to quantify them even more so. But of course, they cannot be excluded. I think this statement of caution has to be shared, even though I think it's also fair to say that typically the Life Science sector, the biopharma sector are less impacted from such effect. So I'm coming to the guidance now for the full year of 2025.

We are expecting robust sales revenue growth and a further or an increase of our profitability. As you can see, and I'm starting from the bottom of this table, we expect a slight increase of 1% midpoint for LPS. Again, bandwidth as said earlier, plusminus approximately 2% at this point of the year. Bioprocess plus 7%. That makes then for the group plus 6%. On the top line and our EBITDA margin guidance is 22% to 23% for LPS, 31% to 32% for BPS, and 29% to 30% for the group. CapEx ratio around 12.5%. Net debt to underlying EBITDA a decrease to approximately 3.5% by the end of this year. And then important to note that this the margin forecast does not include any potential effects from tariffs and related mitigating and corrective measures As you can imagine, a tariff surcharge might even inflate the top line to some extent, which then might lead to a certain impact on margin. We expect all those effects to most likely be rather temporarily and also only quite limited. And once again, let me underline that we do not expect any influence on our strong position and competitive So and with that, I would like to hand over to Rene for SSDs.

Jochen, thank you very much, everyone. Let me quickly walk you through the Q1 results of the Sartorius Stedim Biotech. As Joachim and Florian already mentioned, it was really good to see the continued positive momentum after the strong Q4. Last year, now also in the Q1 and we are really satisfied with our achievements in the first quarter. While customers remain cautious with their investment in equipment, our high margin recurring business with consumables products is performing really well and is performing well across all consumables products [indiscernible] As well as all regions. In the first quarter, we recorded double digit sales revenue growth of 10.4% for the SSB Group, in constant currencies to €745,000,000 and the book to bill ratio was well above one in the quarter. Great. And looking at the underlying EBITDA, increased over proportionally to sales revenue by almost 20% to €229,000,000 in addition to the higher volumes and higher proportion as mentioned of the the consumables. Also, the previous year's efficiency program made also a positive contribution to the profitability The underlying EBITDA margin then increased to 30.8%, up by more than two percentage points. Regionally, we observed strong performance across all regions, The Americas region nicely catching up, showed a double digit growth of 13.8%, EMEA increased by 8.9%, and the sales revenue in Asia Pacific region was up almost 8%. [indiscernible] a strong double digit growth of 14.2% in Asia.

Looking at the cash flow, the net operating cash flow, more than doubled, euros $220,000,000 compared to €55,000,000 in the previous year, reflecting the higher earnings, the lower tax and the stringent working capital management as Florian described it We are also progressing well with our investment programs in manufacturing and R and D infrastructure, CapEx came as planned with 65,000,000 yet disproportionately low in the first quarter, and the ratio stood at 8.8%. A quick view on the key financial indicators. Deleveraging progresses as expected. With the net debt to underlying EBITDA ratio down from 2.8 to 2.7 as of the end of Q1. No additional comments on from me on the tariffs as Joachim covered them already in the SAG group part. By that, I move now to the guidance for the full year 2025 for the Sartorstetil Biotech Group. Based on the first quarter positive momentum, we expect continued demand recovery for our recurring consumables products and still rather muted equipment business in 2025 we project top line revenue growth of around 7% for this year and with the continued above average volatility at this point in time, a range of plus minus two percentage points. Terms of profitability, expectation is the underlying EBITDA margin will be around 30% to 31% compared to previous year figure of '28 And as Joachim explained, this margin forecast does not include any possible effects of tariffs or related mitigating or corrective measures.

CapEx ratio around 13 and the underlying net debt to underlying EBITDA at 2.5 down from previous year 2.8. And with that, we move to Q and A. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, limit the number of questions to two per person. Speaker mode and eventually turn off the volume from the webcast. Our first question comes from Subbu Nambi with Guggenheim. Please go ahead.

Hey, guys. Good morning. Thank you for taking my questions. Was there any pull forward of orders you observed in the quarter because of the tariff dynamics or any macro uncertainty? I ask because there was higher than expected growth in Americas. So any particular reason what drove that would be helpful?

Okay. Yes. So only one question. Thank you very much. We haven't seen that. We don't consider that to have played any relevant role during Q1.

And then what drove the higher than expected growth in Americas then? [indiscernible] say that it was higher than expected. I think last year, partially had the question whether development in The Americas was a little bit more down or more muted than in other regions, and we said, no, not really the case. Often, it's rather a temporary effect that has to do also with comps And there is no underlying trend or anything that we can see here.

Perfect. Thank you, guys.

The next question comes from Doug Schenkel with Wolfe Research. Please go ahead. Good day and thank you for taking the questions.

So first on instruments. You said early in your prepared remarks that you have had quite a number of good discussions about instruments. In spite of the actual pressure on revenue. You tell us more? Where are you seeing the most activity? What type of customers? What type of instruments? Is this for expansion or replacement? And then conversely, where is activity more muted? That's really the first topic I would like to cover. The second is in The United States, I believe you have said previously that one third of U. S. Revenue is supported by U. S. Production. In response to tariffs, how quickly could you increase Thank you. [indiscernible] Maybe I answer the second question and the first will be answered by Rene because this is really mostly that is related to discussions that we are having with customers in the Bioprocess division currently. So a little bit more than a third of what we sell into The U. S. We manufacture in The U. S. Currently. And we believe that we can can shift another 10% or so within just a few months. On the longer time horizon, maybe a bit more would be possible as we quite have some infrastructure there.

But of course, also those shifts at some point come at a cost So therefore, we are would not flag today that we will shift much more than than around this 10 percentage points. As we said, there are a number of measures underway And we think that we will see in our industry not just by ourselves, in our industry, quite a lot of tariff surcharges for now. And take the first question on the instrument systems. So what what we see is kind of a continued ongoing quite high activity level on the customer side. When it comes to preparing for additional equipment purchases, preparing for your question was partly related to is it expansion of capacities or replacements? So we start especially this first quarter, starting to see more and more expansion. Projects coming a lot of demonstrations for equipment are going on. Yet nothing which would result yet in a really increased level of orders, but we are optimistic that this ongoing high level activity level we will see the recovery of the equipment starting this year. Our next question comes from Shugo Sobat with BNP Paribas. Please go ahead. Hi, hello. Thank you for taking my questions and congrats on the prints.

I have two. So first question on order intake. Would it be fair to assume that book to bill would be doing better than historical trends of around 1.08 in the quarter? And second, thanks for the clarification on the forward of demand, which apparently had no impact on that order intake in Q1. Just wondering if this also applies to pent up demand or blanket orders, which I think you had a bit of an impact in on the order intake in Q4. So that would be my two questions. And thank very much Joaquin for all the interaction in the past years and good luck and all the best for the rest.

Yes. Thank you very much Hugo, also for your kind last words. Now. You have to live another half an hour with me now. But let me first of all ask you for clarification of your second question. We are not sure whether we really got it. Can you please repeat your second question, Ubo?

You made some clarification comment on the fact that there was no pull forward of demand. Impacting the order intake and lifting the order intake in Q1. I was just wondering if you also haven't seen any pent up demand and or any blanket orders. In this Q1 order intake?

Thank you. Large orders So yes, thank you very much. So guess we got it now. So on the first one, order intake book to bill ratio. So I think what is important to note here is because you are relating that and I think that makes a lot of sense to longer term trends and levels. What is very important, the 1.08 that you were mentioning, was indeed a longer term average. So it's a good yardstick to compare a current level with. But I would always recommend, we would always recommend to use it rather for annual book to bill ratios than for quarterly book to bill ratios. So having said that, what we have seen now for two years, pretty much consistently, of course, coming from a low level after the reduction of inventory levels kicked in at customers, that our moving annual total book to bill ratio is moving upwards. Moving on to our total book to bill ratio is just that what I mentioned, what makes sense to look at. That's represents a twelve month average. [indiscernible] And we are now since since more than a quarter above one with this moving annual total. So all this moves exactly into the right direction.

And of course, the moving annual total moves a bit slower than a monthly figure. I think that goes without saying. So and then my last piece of perspective that I would like to share here is for the quarter, the yardstick of our of our longer term average is a good comparison. Let me phrase it like that.

So that is the level that for the quarter, we are now roughly seeing But again, please keep in mind this makes really sense on a moving annual total. Perspective only to measure a gain. But again, all all those trends, all those signs are exactly moving in a nice consistent way into this direction. And then on blanket orders, not higher or anything than we have seen at other points in time, yes? This always plays some role Some customers place such orders. Typically, by the way, at very individual points in time, you wouldn't say always happens in Q1 or it always happens in Q4. It's really different from customer to customer, and there is no particular pattern that we could report for Q1. Our next question comes from Richard Bosser with JPMorgan. Please go ahead.

Hi, thanks for taking my questions. And I'd echo Hugo's comments. Good luck Joachim and thanks for everything. Now the questions, maybe I could ask about the seasonality in bioprocess. How are you thinking about that? Obviously, had a very strong Q1 above 10% growth. And your guidance implies is a 5% to 9% range. How are you thinking about that based on what you can see in your order book? That's the first question. And the second question, just on LPS. Just again, pretty similar question. It's been relatively weak in Q1. And obviously equipment's remaining muted and that's quite a large portion of the business. What gives you the confidence to be able to get to 1% growth given the decline that we saw in Q1. Thanks very much.

Right.

Thank you very much, I take the first question on the seasonality in in the bioprocessing.

Look, nothing really special what we would expect or different to previous years.

With respect to seasonality. You're right, good good Q1, strong Q1. But no big ups and downs expected for the rest of the year.

You know like if we look seasonality, maybe it's fair to say Q4 strongest followed by Q1 and then Q2, Q3. That's something we would also expect for 2025. Again, no big differences You can read from our guidance 7% and the range we have to plus minus two percentage points. Gives you a good idea where we are heading. Yes. Maybe just some first remarks on LPS and then Alexander will add to that. So the ratio also for LPS has been encouraging. And following an encouraging trend. As I just explained. [indiscernible] then we also have to keep in mind that it hasn't been so much a a reduction of inventory levels at customers, but we also have seen a period during 2021 and 2022 in particular with partially still having an effect in 2023, of significant expansion of lab capacities, research capacities, lot of investments being made into instruments and therefore a muted demand following that. And I think we have seen the trough here And then on top of that, the division also has launched a few products, more to come, very encouraging customer feedback. And maybe, Alexander, you add to that.

Yes. Following in the comments on the new product launches, we could see that with innovations, it really resonates with the customers. So launching instrument in the January and in March, we already had the first order. So really a rotation of from the lead to the order was faster than usual. And historically, we have also seasonality within the LPS division and second half of the year for us always stronger than the first half of the year, the we saw in all the previous years. So it's innovations, it's seasonality and of course we didn't utilize fully potential on recurring revenue. I see that coming together with instruments in the second half. Probably stronger than now.

Thanks very much.

The next question comes from Paul Knight with KeyBanc. Please go ahead.

Yo, team. The question is on tariffs Do you think customers will easily absorb those higher prices because products are so important to therapeutic manufacturing Yes. So it's it's really important to underline that we are and I would guess and assume that our peers will do this very, very similarly that we are really only passing to our customers those those additional costs that we are facing through tariffs So and we'll be very transparent towards customers about that. And therefore, I believe that our customers will will accept that. And also can accept that And you are right, all products are essential for the manufacturing processes in particular. But as always, we are not taking unfair advantage of that.

But we are planning to to compensate the effects that we are facing.

And then regarding National Institute of Health, are the related universities spending less due to the budget confusion. And then the other part of NIH, they are encouraging less animal, but more cell test testing. How quickly do you think that cell testing develops?

Yes.

So thank you for this $100,000,000 question. We believe actually that there is reason to be quite a bit optimistic. Why?

Because this technology is innovative, no doubt.

On the one hand, and still a lot of further improvements and expansions of this technology possible. And we believe that Matek is therefore the best available platform.

But at the same time, it's a technology that is very well established in the cosmetics industry, for example. Of course, you could say with a limited scope and with a less complex scope but nevertheless, absolutely established. And I think it has been a long way coming. That there's no the broader ask and support and commitment for an establishment of this technology. And therefore, we are quite optimistic. At the same time, we should keep in mind that when you look on animal testing globally in total, within drug development, research and development I think only 15%, maybe 20% of all the animals being used are being used there. Right? So even if within the next five to ten years, we can compensate for that to a large, large extent we are addressing only maybe max 20% of animal testing so far, yes? So but nevertheless, it's absolutely worth But as Alexander also said, it's not only and only in tips here, only that It's also that this tissue based test procedures provide more relevant biological insights and allow for an accelerated and more efficient drug development. I think it's really a a technology that provides a lot of advantages strong advantages.

And therefore, I think there's good reason to assume that it makes substantial inroads with within the next couple of years.

And then The next question comes from comes from James Tempest with Jefferies. Please go ahead.

Yes, hi. Thanks for taking my question.

Just to come back to the comments on book to bill sort of well above one. I mean that does imply a material increase from one. So wondering if you can help quantify that. I think from memory you did 1.2 times or so in Q4, which seems to be more irrelevant quarterly reference point. And we've had a bunch of incoming as well on why you stopped disclosing orders and some investors have been surprised if you could help us understand that. And I'll come back for a follow-up. Thank you.

Okay. So, yes, thank you for that question. So we have been in discussion and interaction and dialogue a lot with investors and with analysts over the last yes, you could say pretty much like eight quarters or so. And clearly, the majority of those discussions has led to the conclusion that the full disclosure of order intake, which was unique Yes, nobody else was doing that in the same way. [indiscernible] to a distraction from the more relevant KPIs And you could also say sometimes sometimes too misinterpretation. And therefore, we have decided to to really align a little bit more with what seems to be I don't know whether it's right to say market standard or the average level of disclosure here. And that is why we are giving this insight and nevertheless try to give additional color through explanations as we are giving it here today for both divisions. And and the group. And I thought that we also were giving some further help in interpreting this information in the right way. So maybe let me once again say for both divisions at the group, we see a positive trend for the what we would consider the really relevant perspective, which is the moving annual total trend for book to bill and that we now since more than a quarter see this number being above one.

And I also gave an indication that for single quarter, even though that is maybe even a little bit too short sighted, we are somewhere around the level that we have seen on the long longer term averages before the pandemic. So I hope that's helpful, and we are fully committed to support you interpreting these numbers in a good way and giving this insight. But we, the same time, are convinced that this full disclosure of order intake really bears the risk of too short sighted interpretations, misinterpretations and distraction from focusing on on the more relevant KPIs.

Thanks for that. And my follow-up is if you could just comment on industry lead times and whether you're seeing those extending and any view on excess capacity across the industry or if you think that lower? You've mentioned seeing more frequent orders, but you're also seeing volumes going up per order. And if so, how does that relate to pre COVID? Thank you. [indiscernible] are you referring to capacity utilization within on our customer side or on our side?

Well, I guess, your side in terms of being able to supply and our lead times, are lead times shorter or longer And are you seeing the average volumes going up or not? Just trying to get a sense in terms of whether the ability to supply customers is is getting harder because there's increasing orders sort of coming in, in terms of the demand your products?

I can take that question. Thanks for that. So it's good that the demand is increasing that we talked about that really positive momentum. We see we have expected that And to the lead times, they are product groups we actually are well within the standard lead times, more standard products. Some product groups we've seen now a bit longer lead times. Mostly related to the supply [indiscernible] supply of the components much less of the reason is the capacity. Capacity is there. Quite quick in ramping up. We are doing that. Doing but in some cases, waiting for together components that can lead to a bit bit longer lead times.

Thanks very much.

The next question comes from Charles Pittman with Barclays. Please go ahead.

Hi, thank you very much for taking my questions.

Just one more on orders and your commentary around the lack of pull forward. I'm just wondering if you could give us a little bit more detail on the phasing of orders seen over 1Q by month? And if you could just I I know there's a fair amount of lumpiness, but just to kind of give a little bit more confidence that you can that insight that there is no pull forward from two 2Q, 3Q, 4Q this year. And then just a second question on the guidance for the year. What you provided previously at FY 2024 was qualitative and you suggested that you're remaining cautious. Can you just confirm I assume this is the case given the plus two minuteus two percentage point range on guidance that this does remain intentionally conservative in your eyes given the strong 1Q results? Thank you.

Yes. On your first question, I'm sorry, we cannot give more insight than what we tried to give you already. So we haven't seen any pull forward orders to the best of our knowledge. And then yes, well, of course, the guidance that we are giving you today we intend to give in a sense of a robust guidance. And I think two percentage points plus minus is a bandwidth that has made us made a lot of sense over the last couple of years. And I'm not only referring to the pandemic, It's at this point in time of the year, it's typically what you can see as variables and even more so in these times, I believe. So but yes, we try to give a robust guidance here indeed.

And maybe just a quick follow-up then. If you could just give us a little bit more detail on kind of what would what would it take to reach the top or the bottom end of this guided range? I mean to get to the top end, would you have to see a full recovery of equipment demand by the end of the year, which suggests you would see some recovery? And what would have to happen to hit the bottom end given the strong 1Q start?

What is what I find always important here is and I hope you can confirm that there is good reason for this confidence now again after a couple of quarters few quarters at least, that are very much based on the fundamental trends. That the question for reaching certain volumes is not so much a question of the if, but of the when. So therefore, it's more the question, okay, will the recovery of the instruments and equipment orders start three months earlier or later. This is indeed a little bit the variable and the aspect that is a bit difficult to predict indeed and not really within our scope of influence. So that's exactly the point But at the same time, the flip side of that coin is that we can be very confident that it will happen. I think Rene was talking about the encouraging discussions that we are having with customers about substantial projects And all this, we shouldn't forget that, is back by very healthy pipelines of our customers, quite strong levels of new product approvals. So therefore, and of course, it doesn't help much when you want to make dialing a number in your Excel sheet for the year 2025.

I fully understand that. But nevertheless, on a little bit bigger or broader perspective, this will come. And at this point in time, it a little bit difficult to exactly say which quarter it will kick in and that makes a difference indeed.

Thank you so much.

The next question comes from Sibyls Buterin with Morgan Stanley. Please go ahead.

Yes.

Thank you very much. First question is just on midterm outlook We are seeing sort of large investment announcement from the pharma industry in The U. S. To onshore capacity with big CapEx plan being announced. Is it fair to incremental demand from building capacity in The U. S? And to what extent do you expect to participate into this? And also the timing where if this happens, is it the 2025 story in terms of orders or would it potentially more materialize in 2026 in terms of order? That's the first question. And the second is just on China. If you could provide an update on the sort of demand and outlook in China. There are some talks of potential acceleration of the stimulus program from the government. So do you think you could benefit from this as well to some extent?

I'll take the first question on the investments [indiscernible] Our business is very much driven by the drug demand on the as you know, for the bioprocess division, percent is recurring consumables revenue and it's [indiscernible] what drives that is the volumes of manufacturing, the approvals of new drugs, going then and driving the increase in the volume and as Joachim mentioned, the pipelines of our clients, that's very much the most important growth driver. The investments which are planned are not necessarily bringing the volume, but in certain standard will have positive effects on the CapEx and some installations of equipment. That, but the major part of the business is really volume driven.

China stimulus, not much new to report on. Of course, all of our customers are looking into opportunities but yet not much has materialized, I would say.

Thank you very much.

Our next question comes from Falko Friedrichs with Deutsche Bank. Please go ahead.

Thank you. Two questions, please.

Firstly, on the consumables business within BPS. How close to normal demand pattern are you seeing here again? And is this destocking now fully completed or for the most part completed? Then my second question on tariffs. Could you give us a few examples of the types of products that you do have to import into The U. S. At the moment? And when you said that you could shift a little bit about 10% to The U. S. Within a few months, for which types of products would you do that? Thank you.

Okay. So first question, the demand consumables, the pattern we see yes, we are I would say, close to the real demand of our customers. Means that destocking is indeed to the biggest extent already behind us. Still here and there, some pockets and customers still working through the rest of the the inventories.

But it's not anymore the main main topic for us. And on the tariffs, and the product groups examples, in The U. S. Where we Puerto Rico, where we have a large manufacturing facility, [indiscernible] the main the biggest product groups in our consumables portfolio like filters, single use bags, which we have installed capacities over there and then East Coast in The U. S. Also equipment side, assembly of processing equipment.

Products examples where we don't have a footprint in The U. S. Would be some reagents from the recent acquisitions.

As an example.

Thank you. And you, Achim, all the best to you in your next steps beyond November.

Thank you. The next question comes from Oliver Metzger with Adol.

Please go ahead.

Yes. Good afternoon. Thanks for taking my questions.

The first one is more a modeling question to understand. So the strong order intake you recorded in Q4, you describe that the majority of revenues related to these orders were already converted into sales in Q4 or was there some spillover into Q1?

Second question is about early biotech funding. The last weeks were turbulent and we saw in some areas even some reluctancy to invest. Could you share your view whether you saw any deterioration of biotech funding again? And if not, do you see the underlying recovery of early biotech to continue? Thank you.

Yes, Oliver, thank you for your question. Let me answer on order intake. Q4. And just to remind everybody of us, this was overall in the group a very high order intake of more than €1,000,000,000 1,410,000,000.00 to be precise. And of course, there were, I would say, a normal part was already converted to sales in Q4. Also Q1 benefited a little bit of that, but still, as you've seen also that our orders on hand have grown by year end. There is a lot even also after Q1 to materialize in our business. So Q2 and to some extent even Q3.

Yes. And earlier early biotech I would say, clearly not yet back to these very high levels that we have seen in our since mid of twenty twenty and then through 'twenty one and large part of 'twenty two probably, But let me remind you that we are haven't don't have such a big exposure to early [indiscernible] NIH funding directly. Of course, you could say it's a certain proxy for how the general mood is in the industry also in The U. S. So clearly, still, as you say, maybe a little bit of a reluctance But it's also fair to say that the low point is behind us here.

Okay. That's good to hear. Thank you and all the best.

The next question comes from Dylan Beharpen with Stifel. Please go ahead.

Hi there, guys. Thanks for taking my question. So just one clarification. On the tariffs. So just when you talk about surcharges, and plus maybe some transfer pricing, should we just think about this as just generally being P and L neutral ex maybe some quarterly movements? And then my second question would be if you could just remind us on the LPS equipment side, what the split is in terms of biopharma industry exposure sort of NIH and academia The corrective and mitigating measures that we are undertaking are meant to to keep it EBITDA neutral. Indeed, that's what we are aiming for. And Alexander?

Looking into our instruments split between different segments, so you're asking NIH, academia and pharma, NIH is rather small amount, around low single digit percentage. Then the second biggest would be biopharma followed by academia. [indiscernible] all the bioanalytic instruments.

And maybe just as a short follow-up on that. Are you at all concerned about what's happening on the funding side of the university side? And would you expect that would hit ordering on equipment?

We didn't saw any different pattern in the Q1 for the ordering part. From academia. So of course, we will monitor what happened in Q2 and Q3, but Q1 was you could say, pretty usual business in academia with France and on all the orders of the instruments. As well as consumables for this instrument.

Excellent. Thank you very much. Also wishing you a lot of luck, Jochen. Thanks.

Ladies and gentlemen, in the interest of time, please limit yourself to one question only. The next question comes from Charlie Haywood with Bank of America. Please go ahead.

Charlie Heywood, Bank of America. Thanks for taking my questions. Just a quick one on your full year 2025 bioprocess EBITDA guide implies limited margin expansion from first quarter throughout the year. So is it fair to expect that to continue as fairly flat throughout the year on the margin level? Or what's stopping you seeing continued margin expansion? And then just a very quick clarification. Can you confirm your sales guide currently excludes the passing on of tariff costs to customers? Thank you.

Yes. Let me start with the guidance question. First of all, there is of course I would call it reducing factor of the efficiency program as base effects from last year also kicking in. This is why we are taking a more cautious approach on guidance going forward. Second point, keep in mind is that in Germany as well as in other important markets, there will be some cost effects kicking in also because of personnel cost increases, wage increases that are typically kicking in Q2 of the year. This is why we are right now starting into the year with the guidance. That is roundabout the current level of profitability that we have seen. Yes. And the second question also correct. Surcharges yet not being factored into our guidance.

Perfect. Thank you.

The next question comes from Jamie Cookley with Goldman Sachs. Please go ahead.

Thanks for taking my questions. Jamie Cookley here from from Goldman Sachs. So I've got a question picking up again on the timing of when equipment could start to come back in the BPS division. Is that quite a big on the strong growth that we're seeing in consumables? So could you just remind us of what are the key factors that are are driving the slow equipment orders? Is it the fact that during COVID, there was a massive increase in orders? And and deliveries and now some of your pharma customers are waiting to increase utilization of those facilities before ordering new equipment? Is it more of a case that customers are sitting on investment decisions and not not wanting to invest further? Or is it as we seen across the market, there's a lot of activity in the CDMO space with with stainless steel manufacturing. So maybe less of a requirement for single use. So any sort of any factors there that you could opine on would super useful. Again, appreciate you don't have a crystal ball, but if there is any sort of ideas as to when we could start to see equipment being less of an offset on consumables, would be awesome.

Thank you. [indiscernible] let me try to give you a bit of color to what equipment regarding the equipment situation and how describe that I think all [indiscernible] different aspects play a role here. Definitely, is a some of it of overcapacity still in the industry. We've been talking about the China aspect specifically, maybe a region where the was most pronounced or is mostly pronounced Yet, we see a nice kind of a growth of the use of consumables in the installed base, clearly showing that the utilization of the equipment in the industry is increasing. And we are approaching to the high utilization levels. You mentioned CDMOs, maybe that's a group of the small midsize CDMOs where we clearly see that projects coming, utilization rates increasing and first projects for capacity expansion already in our opportunity funnel Maybe to give you an idea, I would say half of the projects, equipment projects we are working on today is what I would call, capability additions like new equipment which customers didn't have before. And maybe then the other half fifty-fifty split. Capacity expansions and second the replacement of the older equipment.

I hope it helps to understand the situation there.

Yes, that helps. Thank you very much and best of luck Joakim for the future. Thank you.

The next question comes from Charles Weston with RBC. Please go ahead.

Hi, thanks for squeezing me in.

One on inventories.

Specifically your own inventories. Has your inventory reduction program finished? And there any margin impact from that in Q1? Thank you.

Yes. Thank you for that question. Inventory developed in Q1 quite stable, but based on an increase business of course. So in terms of inventory days, we were able to make even improvements in Q1, and there have been no margin impacts like the ones that we were talking about last year. Because everything that we have been producing was was not reducing overall the inventory to a large extent. So no double effect of fixed costs in our P and L in Q1. Thank you. Is there more to come on inventory days? No, we are not expecting that. In 2025.

Okay. Thank you very much. Good luck to you, Tim.

The last question comes from Delphine Lelwe with Bernstein. Please go ahead. Mr. Le, your line is open. Maybe your microphone is on mute.

Yes, sorry for that. No, I had some issue with my mic.

Firstly, Joaquin, thanks a lot.

For all the job you've been doing over the decades. We know each other and when I look at the journey you've been doing on the biopharma and all the innovation you bring to the table, I think it's an amazing achievement. So well done for your leadership. And where we are today. And so obviously, my question is going to be for you. And probably with a long term or midterm look at, can you detail us your CapEx expansion plan in The U. S? And what's going to trigger, if any, the tariff a bit of a change in your CapEx direction for The U. S. Specifically?

Yes. Thank you very much, Maybe a few words from my side, maybe my colleagues want to add to that. But the tariffs now, of course, are maybe opening a new chapter in the trade conflict that we saw coming all of us saw coming since more than eight years now. And therefore, also, we have expanded our footprint in The U. S. As well as in Asia, for example, quite a bit over the last couple of years. Just as a reminder, we have substantially expanded our presence, our manufacturing presence in Yaalco. I think just a minute ago, Rene was talking about the bandwidth of products that we are manufacturing there that is very substantial. We also have opened up just last year our our center, our global center for bioanalytical technologies, instruments technologies, manufacturing and R and D in Ann Arbor. As the majority of the market for such instruments is in The U. S. And then later last year, we have opened up our customer interaction center about product development process development, sorry, in Marlborough close Boston with a certain focus on new modalities. And we also are running manufacturing sites there, both for equipment as well as for consumables for the Bioprocess Solutions division.

So what I want to say by that is we already have quite an established footprint We can further expand the utilization of these capacities short term to some extent. I was talking about that when I said 10 percentage points that would reflect something like by a quarter or so. In relation to its current utilization. And of course, it would be possible to go a bit beyond that than afterwards if necessary as well. So we think this is already quite a substantial footprint And at the same time, and in efficient footprint because we think it would be it would come at a cost if we would expand our footprint in The U. S. Substantially also across all other product segments. So therefore, no plans today And therefore, we would project today that CapEx ratio globally for Sartorius will go down within the next years to come after our expansion in Asia has been further progressed. So that's a bit our perspective here today.

Okay. Okay.

Good. So I think we have we have come to an end here today. And all questions hopefully have been answered to your satisfaction. I would like to thank you all for your interest in Sartorius. I would also like to thank you personally for your kind words. During our today's call, but also always for your yes, your support by by covering Sartorius And it has been really a a very satisfying journey together. In this very nice industry, I think, are all focusing on. So thank you very much. My journey at Sartorius is over, but not my journey overall. So let's see where we will meet again in the future I would I at least would be happy to do so. So all the best to all of you, and thanks a lot. Ladies and gentlemen, the conference is now over.

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