Stevanato Group S.p.A. Price & Performance (STVN)

Please read our Safe Harbor statement included in the front of the presentation and in today's press release. The company does not assume any obligation to revise or update these forward looking statements to reflect subsequent events or circumstances except as required by law. Today's presentation may contain non GAAP financial information. Management uses this information in its internal analyses and believes this information may be informative to investors in gauging the quality of our financial performance, identifying trends in our results and providing meaningful period to period comparisons. For a reconciliation of these non GAAP measures, please see the company's most recent earnings press release. And with that, I will now hand the call over to Franco Stevanato.

Thank you, Lisa, and thanks for joining us. [indiscernible] will review our 2024 performance address current market dynamics, discuss our fourth quarter results and provide 2025 guidance. We finished fiscal year 2024 with a positive fourth quarter that was in line with our expectations. In 2024, revenue grew 2% compared to last year, driven by 6% growth in Biopharmaceutical and Diagnostic Solutions segment. Which offset the expected 70% decline from the Engineering segment. Growth in the BDS segment was driven primarily by robust market demand for high value surrenders. This helped drive a 15% increase in high value solutions, which represented 38% of the total company revenue for fiscal twenty twenty We believe the success we are experiencing in high value solutions also demonstrates that we are investing in the right market [indiscernible] to match customer demand. We expect that these investments For revenue from Injectable Biologics increased 24% year over year and represented 34% of the BDS revenue, compared to 30% of BDS revenue last year. Additionally, fiscal twenty twenty four, strong revenue growth in synergies coupled with growth in other product categories. Helped to offset a 34% decline in revenue related to bulk and easy fill buyout. As you know, this temporary soft vial demand stems from the industry wide vial destock, We saw modest improvements at the end of the year.

With some customers slowly returning to more normalized ordering, while other customers are still managing inventories. As a result, our thoughts remain unchanged, and we still anticipate a gradual recovery in vial demand in which we built into our guidance. We still expect that the market will continue to stabilize throughout 2025 with a faster recovery in bulk buyers. During 2024, we also made significant progress on our gross investments, and we achieved two important milestones. First, we generated our first commercial revenue official in the Second, our Latina project in Italy turned profitable at a gross profit margin level in the third quarter. Please turn to Page six for a review of our expansion projects. In Latina, our teams are focused on the ongoing ramp up of CERENGERS capacity as part of the Phase one. Throughout 2025, we will continue installing, validating and launching additional We are still in the early phase of scaling up this important growth investment As you may recall, the next phase of our expansion in Latin will be dedicated to expanding easy fill cartridges capacity. This is a part of a larger program for an anchor customer expanding into ready to [indiscernible] The design and planning are completed.

And the core infrastructure build out is expected to continue through 2025. As part of this project, the engineering team will be delivering our next generation easy fuel cartridge slides, We currently expect a line installation to begin in early twenty twenty six. This is a market area where the demand environment has been more robust than we previously We believe that our global leadership position and the long history in both legacy and new JLP-1s position us as a partner of choice in this growing market. Turning to Fisher. We are making great progress and activities are advancing as planned. Our world class facility is supporting U. S. Customers across the full value chain and our investment is strategically focused to meet the high market demand for biologics. Alongside the launch of commercial production last quarter, we are installing and validating new syringe lines throughout 2025. As we scale this multiyear growth investment. In parallel, construction is underway on the build out of our device manufacturing operation in Fishers. This effort is supporting a large customer with multiple device programs. Across a range of biologic treatments. Will support this U. S. Global customer with a fully integrated solution with both our Nexus ranges and our device manufacturing.

Commercial activities related to this new contact manufacturing work are expected to begin sometime between late to 2026 and early twenty twenty seven. Please turn to the next slide for a status update on our optimization plan for the engineering segment. The team made major strides during the quarter We are on track to complete the previously delayed projects in 2025. With the majority expected to be completed midyear. Right now, we are squarely focused on a successful and installation of these manufacturing lines at our customer sites. I'm confident that we are moving the right direction and our near term efforts are yielding results. The next phase of our plan has a longer horizon. This includes optimizing our operational footprint, increasing efficiency by harmonizing our industrial processes, and streamlining activities into more defined structures. Our customers value our innovation, our top tier products. Continue to see a favorable demand environment for our engineering segment underpinned by the rise in biologics. Our efforts are designed to drive efficiency and productivity gains to best position the segment for long term success. In summary, while 2024 was challenging, to improve execution drive operational improvements through footprint optimization, increase our efforts to streamline processes and look for further areas to gain production efficiencies.

These ongoing efforts will improve our setup for long term growth. Looking ahead, we believe we are uniquely positioned with an integrated value proposition to better serve customers' wide ranging needs. Our long history of embedding science and technology to drive continuous advancements has led to a differentiated product portfolio. We operate in attractive end markets, and have an increasing presence in Biologics, which is the fastest growing market segment. We have developed next generation products such as our ALBA portfolio that are ideally suited to meet the scientific demands of highly sensitive drug products. We see a great opportunity driven by favorable macro tailwinds such as aging population, the growth in biologics, and the rising patient adoption of self administrated injectable drugs. We are positioned in the company to take advantage of these opportunities to drive long term sustainable growth. I will hand the call over to Marco for a review of our fourth quarter results. Thanks, Franco. Before I begin, I want to clarify that toll comparisons refer to year over year changes unless otherwise specified. Starting on Page 10, For the fourth quarter of twenty twenty four, revenue grew 3% to 330,600,000.0 The impact of currency was neutral.

Growth was driven by a 7% increase from the biopharmaceutical and Diagnostic Solutions segment. Which offset the expected 16% decline in the Engineering segment revenue from High Value Solutions grew 9% one hundred and thirty one million euros in the fourth quarter represented approximately 40% of total revenue. This was driven by growing our premium performance syringes, and to a lesser extent other product categories. The solid performance in the fourth quarter helped boost our full year mix of high value solutions to 38% of total company revenue. In line with our expectations. For the fourth quarter of fiscal twenty twenty four, a strong mix of high value solutions and year over year improvements efficiencies and Latina, partially offset the unfavorable gross profit margin impacts from Vale destocking including lower revenue from EasyFill Vials and the utilization of vial lines and the under absorption of costs and lower gross profit margin in the Engineering segment. As we continue to execute our optimization plan. As a result, gross profit margin for the fourth quarter of twenty twenty four declined by two ten basis points to 29.7%. Our new manufacturing plants in Fishers and Latina improved year over year. But they are still expected to be dilutive to gross profit margin in the near term.

In response to industry wide soft vinyl demand, we launched the initiative to curtail overhead costs without compromising future growth. We saw the benefits of this in the fourth quarter. And operating profit margin increased 20 basis points to 20.2% for the fourth quarter of twenty twenty four. As a result, net profit totaled $48,300,000 and diluted earnings per share were $0.18 On an adjusted basis, net profit was $51,500,000 and adjusted diluted EPS were $0.19 for the fourth quarter of twenty twenty four. Adjusted EBITDA increased 5% to 90,900,000.0 And adjusted EBITDA margin increased 50 basis points to 27.5%. Let's review segment results on Page 11. Starting with the biopharmaceutical and diagnostic Solutions segment. As Franco noted, we see ongoing signs of stabilization in the Weimar. With improvements in the second half of twenty twenty compared with the first half both in revenue and order intake for bulk and diesel fuel buyers. For the fourth quarter, Revenue from the BDS segment grew 78% on a constant currency basis to 279,400,000.0 This was driven primarily by growth in iValu Syringes, which offset the 14% revenue decline related to bulk and diesel fuel buyers. As expected, the drop was larger in our more accretive easy fill vials.

Revenue from High Value Solutions grew 9% to a record of 130,600,000.0 in the fourth quarter. Reaching 47% of BDS segment sales. Revenue from other containment and delivery solutions increased 6% to $148,800,000 mostly due to higher sales tied to contract manufacturing and A strong fourth quarter contribution from High Value Solutions and improvements in Fischers and Latina as we continue to scale and to partially offset the margin impact from Vale destocking. As a result, in the fourth quarter, gross profit margin declined two fifty basis points to 31 For the fourth quarter of twenty twenty four, actions we took during the year to moderate the decline in operating profit margin. Which decreased 40 basis points to 23.3%. For the fourth quarter of twenty twenty four, revenue from the Engineering segment decreased 16% to €51,200,000 Performance in the business was mixed. We'd expect that revenue declines in glass conversion and visual inspection offsetting growth in Assembly and Packaging. As expected, gross profit margin for the fourth quarter decreased to 18.6% helped to maintain operating profit margin consistent at 15.3% compared with the same period last year. As our results demonstrate, the steps we are taking are helping to improve the segment's operating and financial results.

We believe these actions will better position the segment to capture future opportunities and improve the overall health Please turn to the next slide, for a review of balance sheet and cash flow items. We ended the year with cash and cash equivalents of $98,300,000 and net debt €335,000,000 With our current cash on hand, available credit lines, cash generated from operations, and our ability to access additional financing we believe we have available liquidity to fund our strategic and operational priorities. Over the next twelve months. For the full year 2024, Capital expenditures totaled $286,600,000 89% of CapEx was deployed for growth projects. To meet rising demand for high value solutions For the full year 2024, net cash from operating activities totaled 155,800,000.0 a substantial improvement from the previous periods. Cash used in the purchase of property, plant, equipment, and intangible assets was $313,600,000 The combination of increased cash flow from operations and lower CapEx helped drive a significant year over year improvement in free cash flow. For fiscal twenty twenty four, this resulted in a negative free cash flow of 148,500,000.0 compared with the negative €333,900,000 in fiscal twenty twenty three. Lastly, on Slide 13, we are establishing 2025 guidance.

We expect Revenue in the range of 1,160,000,000.00 to $1,190,000,000 Adjusted EBITDA in the range of $293,000,000 to 306,300,000.0 and adjusted diluted EPS in the range of $0.51 to $0.55 Our 2025 guidance considers headwinds and tailwinds And we have assumed the following fact. Revenue will be stronger in the second half of twenty twenty five compared with the first half. We expect a step down in revenue in the first quarter of twenty twenty five compared with the fourth quarter of twenty twenty four. With revenue expected to grow sequentially throughout the year. The BDS segment is expected to grow mid to high single digits driven principally by growth in high value syringes. For the Engineering segment, have assumed that neutral to low single digit growth compared with 2024 As we focus efforts on execution, we expect that high value solutions we range between 39% to 41% of full year total revenue. Turning to gross profit margin. On a consolidated basis, We currently expect that gross profit margin will improve by a approximately 100 to 140 basis points. Compared with 2024. Driven by continued improvement in Latina and Fishers, as our capital investment projects scale. As well as increased contribution from high value solutions.

We also anticipate some headwinds While Latina and Fishes are expected to improve year over year, they will still be dilutive to margins.

And we expect higher depreciation in 2020 We expect depreciation and amortization will range between 8.7% to 9% of expected sales. Which reflects the range of revenue in our guidance. Currency is expected to be neutral compared to 2024. We are assuming a tax rate of approximately 23% and weighted average shares outstanding of $272,900,000 And finally, capital expenditures and free cash flow. For 2025, we have assumed CapEx in the range of €310,000,000 to €340,000,000 euros before customer contributions and prepayments Our 2025 plan reflects an acceleration of CapEx related to the build out for easy fill cartridges at the request of a large customer. We had previously expected this spending to occur in future periods. Net of contributions and prepayments CapEx is expected to range between €250,000,000 Regarding free cash flow, in 2025, we expect increased operating cash flows and higher contributions for CapEx. This will drive continued improvement in free cash flow in 2020 We then expect a range between negative EUR 40,000,000 and negative €60,000,000 for the full year. I will hand the call back to Franco.

Thank you, Marco. In closing, we remain focused on executing our key priorities and achieving our long term objectives. We operate in growing end markets with favorable secular tailwinds and we have several reasons to be confident in our strategy direction. First, we continue to deliver organic growth. Driven by solid demand for high value solutions, the main pillar of our long range comps. Are investing in the right areas to meet the rising customer demand. And we have a growing presence in biologics, Second, we expect it to increasingly benefit from the new capacity projects as we advance our ramp up activities and drive profitable growth. In 2025, we expect that these projects will be deleted to gross profit margin and in 2026 we will begin to realize the benefits of scale and productivity gains as the projects mature. Third, the buyer market continues to gradually recover and stabilize remain optimistic that as the Vale demand continues to normalize, we will see a return to historical market volumes and growth rates. Finally, we are making meaningful progress on a clear and actionable plan to improve our operational financial performance in Engineering segment. All in all, the fundamentals of our business remain stronger.

We have an excellent market position, and we continue to innovate each and every day. Our unique value proposition, integrated offerings make us a partner of choice for Cast As CEO, I'm firmly committed to putting the business on the right path to return to double digit growth, expense margins and build shareholder value. We believe we have all the ingredients in place Operator, we are ready for questions.

Thank you. This is the Chorus Call conference operator. We will now begin the question and answer session. First question is from Michael Rieskin, Bank of America. Please go ahead.

Great. Thanks for taking the questions and congrats on the quarter. I've got two questions. I'll go through them quickly. First, on the Vyle recovery, it sounds like vial, especially bulk vials continues to grow gradually normalize. You've kind of talked about that trend for a number of quarters now and it's moving in the right direction. Any additional color you can provide on when you think things will be fully back to normal? Do you expect the vial environment to sort of be fully recovered in the middle of twenty twenty five? Or are you still working through it for the rest of the year? And I've got a follow-up.

Good morning, Mike. Franco Stavonato speaking. So our main takeaway after having very strong interaction with practically all our customer, big customer and also the regional customer is that we are confident that 2025 to be much better than 2024. How we are going to translate this because we see SignNet everywhere where we see customer, big international customer, and regional customer that are starting to restore to normalize ordering partners. So overall, we see that during this 2025, there will be a gradual recovery throughout all the year.

Okay. Great. And then on some of your comments on gross margins, I mean, you're pointing to pretty significant margin gains year over year, but you've had some headwinds last year, you still have some margin dilution next this year. If I think about Fishers, Latina coming up to speed, and maybe some of that incremental CapEx you talked about with that new customer. Just talk about how those projects need to ramp and how those facilities need to ramp for them to go from being margin dilutive to margin accretive? What's the time scale on that or sort of the volumes need to be pushing through those new capacity where that goes from being a headwind Thanks for the question, Michael. First of all, as you know, at is a little bit ahead compared with [indiscernible] We started generating positive gross profit in Q3 twenty twenty four in Latina. And we are keeping on improving, ramping up the revenues. We expect there by the end of the 2025 to have a normal gross profit margin with respect of the high value products.

We are producing there. Fishers is a little bit different because it's the larger plant. It's a greenfield. And basically, as you know, we have two, three quarters of delay in the program compared with with Latina. We are fully in line with our plan, but it's about three quarter after. There, we are very happy with the results in Q4. We started generating good amount of revenue in Q4 and we are keeping on improving true validations with customers. We expect to turn positive gross profit in T shares in the second half of twenty twenty five. So matter of fact, 2025 will still be dilutive for our gross profit margin in the combination of the two new plants.

Great. Thanks so much.

Next question is from Mayk Alaro William Blair.

Hi. Thanks for taking the question. I want to follow-up on my first question [indiscernible] you guided us down 35% for the year.

And generally came in line with that.

Is there any way you can help us with what we should expect for 2025? And maybe as part of that, when are you assuming a return to positive growth in Vials? Do you get that in the second half this year?

Yes. Thanks for the question. Marco speaking. First of all, as Franco mentioned, we can see some signal of improvement in the last quarters, both revenue and orders intake were better in the second half of twenty twenty four compared with the first half. Are right. We went down 34% in the year. In the last quarter, we went down 14% year over year. So we can see some signal of improvement Going to your question, we are currently modeling a growth in buyers for 2025 mid single digit, twice single digit, As Franco mentioned, we see progresses throughout the year and quarter after quarter, we expect a sequential improvement.

And then you referenced in the script the investments you're making in your device manufacturing operations called out both Nexa and Alba. Think some heightened attention on devices and where they fit for the traditional packing players long term Can you just talk a little bit about [indiscernible] success there as well as your efforts and expectations around scale. Ability to profitably scale those programs over time? Go ahead. Practically, in our strategy, for Strataco Group is really to serve an integrated solution and product portfolio to our biologic customers. In the last year, we developed our [indiscernible] Also, we more and more we for many customers we are building an R and D even more some plants that are able to serve Nexa Syringes, Alba Syringes, Like In The Case That We Have In Fisher, we are building also a lot of capacity for our one of our big customer in United States. We are going also to serve this device with this program. So today, we have a certain number of programs on through the CMO business model and also a certain number of programs through our IP pen health injector that we reserve from the German plant.

In order to fulfill this increasing request from our biologic customers that's looking Stevanato not only for glass ranges, not only for cartridges, I2P, but also like a holistic partner that can where they can buy the glass and the devices. Okay.

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

Hey, thanks for taking the question guys. Marco, maybe one for you just on the pacing of the year. It sounds like just seasonally, one, two, stepped down from 4Q on RED, a big surprise there. Can you just help frame up the quarters, the progressions we're going through here, both revenue and then the margin side would be helpful as well just to think about the cadence of the year as we work our way through here.

Sure. We expect sequential growth quarter after quarter in 2025. With a stronger second half of the year compared with the first half.

Mainly for three reasons.

First, we can see strong demand in high value syringes and these sterile cartridges. But at the same time, we are ramping up capacity. We expect to install several lines in Fishers between May and June. So matter of fact, after the validation, we will have available capacity to satisfy the strong demand. So for this, there is always a stronger revenue The other reason is related to virus. We mentioned before the fact that the expected market will be sequentially better toward the end of the year. The third reason is related to engineering. We are working hard and obtaining good success in recovering the delay. We are delivering several complex projects in this period of time. And we expect to complete the recovery around the mid of the year. So we have the opportunity in the second half of the year to take more workload and increase our revenue also in engineering. That's why we are confident that in the second part of the year, the revenues will be Okay. That's helpful. And then Franco, maybe one for you. Just if you think about the administration change here The U. S. You just talk about any impact? I mean, there's the tariff side, obviously, with Things like Mexico, we'll see what happens with Europe.

Just what you think there? And then on the back of that, some of these trial cancellations HHS go after things like bird flu and maybe some of the BARDA contracts We'll be curious just your perspective on some of these recent changes, what your guide exposure is, how you're thinking about that? Thank you guys so much.

Thank you for the question.

Today, particularly what we have done in Stavantu Group since the last fifteen to twenty years We build a sophisticated supply chain where we try to be domestic in the major growing pharmaceutical area all around the world. Today, we have several plants in Europe and United States in Asia able to serve to our customers the same product from different region. So on the top of this, we can add that we have a very strong partnership in a proactive way with our customer and we are trying to monitor in the best way how eventually to review the supply chain with our customer from the different region. We are putting a lot of attention together with our customers how to approach But the good news that we have a good footprint with the same standard of quality everywhere and the fact that we have to approve this big investment in Fisher Indiana three years ago would make us even more proactive to react to any type of change.

Then Patrick, I don't know if your question was about vaccine. Just to Make sure it's a limited risk for us because because we are generating about 8% of our revenue of BDS in vaccine. But the focus is predominant in Europe. We are today generating around 1% of our revenue in U. S. With vaccine. So it's not a big risk for us. [indiscernible] Great. That's really helpful. Thank you, guys.

Next question is from David Windley, Jefferies.

I was hoping thanks for taking my questions. Good morning.

I was hoping you could comment on the utilization levels or maybe relative utilization of your lines across the different form factors, so syringe, cartridge, and vial What I'm digging for is with vials down as much as they are, I'm sure the utilization is low. And how much that can recover and how we should think about that translating to margin But then also on the other end of the spectrum, you're adding capacity for cartridge And should I correctly interpret that as you're being at very high levels of utilization in your existing cartridge capacity. So just again trying to understand your relative utilization levels of each of the different types of production?

Thanks, Dave, for the question. Marco speaking. So first of all, we have strong demand in syringes. So we are utilizing a lot of the syringes line. And as you know, we are also ramping up capacity to match the long term demand we have with the key customers. We have similar situation with cartridges, but I would let later Franco to explain more [indiscernible] cartridges project About Vias, obviously, after going down 34% revenue last year, we have available capacity both in bulk and in easy fill for obvious reasons. We will still have ability to grow there. We expect to grow in 2025 compared with 2024, but we still have available capacity.

David, we can say that from for what is related to the high value product, our demand is driven by the capacity that we have put in place. We started two years ago Now we are heavily investing in Latina and also in Fisher.

We have a lot of requirements from around the next sub ranges. A lot of requests about ARBA syringes for particular application. There is more and more an increase in demand for ready to fill. In particular, we have one big customer that really have the size of increase their capacity in the next year around this type of product. Even more, there are several tens of our program around cartridges ready to be. So our big focus is really to implement capacity for high value products where we see the higher demand 2025 and also the next year.

Is that on the cartridge program for the specific customers, is that going to be dedicated [indiscernible] or do you expect to be able to diversify that? Both. We have one big anchor customer that is placing a bigger contract where we want they want to have a bigger quantity on cartridge and toothpaste, But also it's also true that we see more and more we have several tens of mid sized customer biologic biosimilar are going to this type of application. It's very simple because they are putting place capacity but they want to also source to partner like us the washing, liquidation, sterilization.

So this is the reason why we are heavily investing already capacity here in Cumino de San. We are going to invest also in Latino with a lot of capacity. In order to be ready to approach this nice tailwinds.

Yes. And if I could ask one more on capacity. I think maybe I missed it, but relatively new to my eyes was the mention of devices in Fishers and adding capacity there for that Could you help us to understand I understand the kind of strategy of being able to provide the client with both the glass as well as the device you help us to understand what your longer term expectations are for the margin contribution of the devices or said differently is Is that a positive evolution of your business mix pursue supply of those devices or are those device margins eventually going to be lower than your glass your high value glass margins? [indiscernible] Thanks, Dave, for the question. We have a different situation in device when we talk about CMO contracts and proprietary solutions, We are working on both. And our strategy is obviously to to became a reliable partner on both. When we talk about proprietary device, it's a nice value product and the range is the normal one in high value product. So above 40%, I'm speaking.

In CMO space, the margin are lower. We are talking between 15% to 35% in line with other containment delivery solutions. Yes.

If I can, David, give you the different angle more from business point of view. We if you look at the growth in Biologics in the next years, there will be nice double digit growth on ranges like Nextiva, in parallel, there are the equivalent growth on 10 of to interest. So our goal is to go to our customer and to show the full value proposition no matter if it's is to our IP product or through the business model of CMO, because this will help us to capture more market share and more growth And this is why the plant that we have in Fisher have this flexibility is considered by our guest customers like UnHub where they can have the integrated solution service that is a little bit unique in this moment in United States. We're taking benefit from this Thank you.

Next question is from Larry Solow CJS Securities. Please go ahead.

Hi, good morning. It's Pete Lucas for Larry.

You covered most of my questions. Just on the engineering segment, operating margins to return to mid teens levels over the course of the next few quarters? And perhaps build on that, if you could just give us some color there? Thanks.

Yes. You have noticed we reached mid 15% in Q4. So we are happy with the progress that we are making. We are not yet at the level we were in 2023, but we are progressing. Our goal is to complete the let's say, delay issue by mid of next but the further step, as Franco was explaining, is a further optimization to to further improve our profitability in the segment.

Larry, if you can further add more business color that the team made a big improvement during this quarter. Today, we are on track to deliver our Discompressor line to our customer.

Our target is to complete this delivery at mid of the year. This will help to further improve the revenue marginality In the meantime, together with organization, we are going to review what is the cost structure. Also, we are review the sizing of our plant in order to make more efficiency in our operation, both in Denmark and Italy.

Also prepare for the future growth Today, the product we are serving our customer from engineering point of view are very well perceived because there is a big growth in biologics there's a high demand for assembly technology in the industry because of this device trend Maybe more from a regulatory point of view, there are more and more requirement from new surface special line. It's exactly where we want to focus the division the next Yes. Very helpful. Thank you.

You're welcome.

Next question is from [indiscernible] KeyBanc. Please go ahead. Hi, this is Anna on for Paul Knight. Thanks for taking my questions. First, could you frame the revenue generating capacity of the Fishers facility? I know in the past you've mentioned you anticipate more meaningful revenue contribution here in fiscal year twenty twenty five. But what is the utilization rate you expect for 2025? And then just how is overall demand trending here versus initial expectations?

So thanks, Ana. If I got your question, it's a matter of the speed we ramp up. So we expect to complete the the full capacity ramp up in Fissures by 2028. So we are still progressing. We are pretty happy with evolution. We reached our milestone in Q4 twenty twenty four we are progressing with new lines installed, but most importantly, more validations from our important North American customers.

About 2025, obviously, we expect a big increase compared to 2024, but we need to underline the fact that in 2024, we generate a revenue, commercial revenue basically in Q4. So we expect much stronger revenue coming from Fishers in 2025 but we still have room to install more capacity in '26, '27 and '28.

Okay. Perfect. And then maybe just looking at the engineering once the operational changes are executed over the next twelve months, what do you think this business could run at in terms of adjusted EBITDA margins over the long term?

Well, in the long term, we confirm our view. We share about medium to long term construct. We basically to expand our margin increasing also after sales activities. We expect to be more accretive than we were before these progress we face in 2024, but keeping on improving also through the optimization plan mentioned in his remark. But we are confirming the trajectory we shared with you during Capital Markets Day.

Our goal for the engineering division is to keep in the next years high single digit growth thanks to the fact that we want to further reinforce our position inspection system assembly technology with the high speed machine mostly increase the percentage of their sales to our major customer.

Thank you. Next question is from Tejas Saban, Morgan Stanley.

Please go ahead.

Hey guys. Good morning and thanks for the time here. Frankl, I have a question for you on high value solutions. So I think Patrick asked something along these lines earlier, but I was just curious as to in terms of your HBS revenues, what percent is sold in The U. S. And what percent of that U. S. HVES revenue is manufactured locally It's sort of related to the potential in impact of tariffs that I'm trying to get at. And on a related note, is there an opportunity for you guys over the next couple of years here to leverage your global print and flex where you supply from. Depending on tariff regimes. I mean is that a competitive differentiator that is starting to resonate in RFPs just yet?

There's a lot of questions together. Thanks. First of all, we are generating North America About 26% of our revenue The concentration of high value solution is stronger in North America, but we don't disclose the exact number. And this is exactly the reason why we are investing so heavily in eFeeshares to gain customer proximity and serve them through our iValu products. And this is also why we are, as Franco mentioned before, we are confident to manage also the tariff issue because we are local and domestic in many different countries. And please underline if I miss any piece of your question.

Kind of first from business point of view, our strategy since a few years in particular the moment that we have done the IPO in New York is really to invest to focus Theranato Group on high value products. Today, we are heavily investing capacity To Nexus ranges that is high value product Now we are adding capacity on cartridge, you say, to fill that also is high value product. We are mirroring exactly the same in Fisher where we're building capacity, first range and next configuration, then we will add capacity for BioLA-two field for ABB technology. Our goal is to become the global partner with a global footprint that is able to have a very sophisticated, flexible supply chain with the same standard of quality, but our goal is to focus on high value products in the next years. Got it. That's helpful. And then a quick follow-up on Fishers. Think you guys had an agreement with BARDA there for BARDA funding about $95,000,000 of capacity expansion for your standard and easy fill vials at the site. Is that contribution essentially derisked or is there a possible that that could come under sort of scrutiny under the Trump administration?

Correct. During COVID, we signed this contract in order really to build dedicated capacity for vial in bulk configuration dedicated for this market. Today, we are in negotiation to build the capacity in alignment with the contract.

I just want to clarify that Tejas that we have had no indication from the government or from BARDA that there is any risk to that existing grant from them.

Correct.

Perfect. Thank you guys. Appreciate it.

Thank you. Next question please. Next question is from Do Sanko, Wolfe Research. Please go ahead. Good morning. Good afternoon. Thank you for taking my questions. I have two.

One is just given the change in administration and the current geopolitical environment, I'm wondering if through the first two months of Q1, if you have seen any change in customer behavior, any stalling across different geographies, different product categories? And if so, how you have factored that into your guidance keeping in mind you did tell us to model more growth in the back half than the first half. That's the first topic. And then the second topic is just another follow-up to a series of the Fisher questions. As Fisher opens up, when it is fully ramped, how much of high value production in The U. S. Can be supported by that facility? Again, that relates to the geopolitical environment. [indiscernible] how much of your expected U. S. Demand you expect could be serviced by that facility? Thank you.

So just to [indiscernible] any changement with our customer. We are just executing all the contracts we have already signed last year, two years ago with our customer today. The focus is together with them to install capacity to do the validation execute. Particularly in Europe in particular in The States. For what is related to Fisher, our goal is to be in in full capacity at the later 2028 we are continuing to install this capacity for high value products practically terms of syringes, like I mentioned to you, in terms of configuration of syringes, and also for what is related to to Viator A2FILL. We also like we mentioned before, we had this agreement with BARDA that is referring to EasyClick Biome also with Bancibia. Also to remember that the feature we have done with the Phase one when we have acquired, we have decided to install capacity in Fisher. We built we purchased a very big land because we have decided to become domestic in The United States with a view of long term like we have done in Europe. So we are now going to execute 2028 at Phase one. We are facing the next year to go to Phase two So in order really to be flexible, and proactive, to approach any type of market opportunity in United States with our biologic customers.

Thank you again.

Next question is from Odysseus Manisiotov, BNP Paribas. Please go ahead.

Hi. Thanks for taking my questions. Here on behalf of Hugo, I've got two please. Firstly, could you provide a clarification on Vios in the 34% decline in Vios sales.

Where it seems that that was more pronounced in easy fuel than bulk vials. Can you share the splits of deck lines between IZIFO and bulk or at least the magnitude of the difference between the two?

And secondly, on the CapEx guide, could you clarify how customer contribution will be recognized? Is it fair to assume that the €250,000,000 to €280,000,000 will be the expected reported figure that we should use for free cash flow next year? Thank you. [indiscernible] from the second question. We are receiving balance sheet contribution in the form of prepayment or contribution to our invest We expect to receive approximately €60,000,000 between prepayment and contribution to to help us in financing the expansion on important high value product projects. So the guidance is between $250,000,000 to €280,000,000 net of prepayment and contribution. About the split of the bulk and sterile decline, we don't split exactly the amount. We reinforce the message that during 2024, the decline was stronger in drybials. But basically, it depends quarter after quarter There could be fluctuation quarter after quarter, but we to disclose consistently with previous quarters. The bundle of the buyers rather than going into specific details.

Understood. Thank you.

Operator, next question please.

There are no more questions registered at this time. Okay. Thank you, operator. I think Franco Stivanato would like to make a couple of closing comments.

Yes. I will adjust that to summarize a little bit the all the [indiscernible] mean to us and also to transfer is the sentiment in Stevanato in 2025. So we are confident 2025 will be much better than 2024. Also, the organization in 2025 is going to be extremely focused on executing our key priorities at where we have put our investment in order to fulfill the demand of our customers. A market point of view, we continue to see high demand for high value products in the different primary packaging configuration is a very high demand of injectable and more and more we see a very high demand from customers who have integrated solution system. We see we are continuing to see positive signal was spread in all the region about the recovery of the buyer This is also important. And also the engineering division done meaningful progress in to deliver on track this complex line. So we are happy for 2025, even more are confident to confirm what we shared during the market Capital Market Day in New York, our ability to target 30% of EBITDA to have to target 40% to 45% of our high value solution in the next year in GD27.

So this is where the company today is fully focused to execute this year.

Thank you. And that concludes the Stevanato Group fourth quarter and year end twenty twenty four conference call. Thank you for joining us. Have a good day. Ladies and gentlemen, thank you for joining. The conference is now over.