service@incommglobal.com Transcript www.incommglobal.com Stevanato Q3 Earnings Call Tuesday, 09 November 2021 Lisa Miles Good morning and thank you for joining us. With me today is Franco Stevanato, executive chairman, F

Lisa Miles Good morning and thank you for joining us. With me today is Franco Stevanato, executive

chairman, Franco Moro, chief executive officer and chief operating officer, and Marco Dal Lago, chief financial officer. I d like to remind everyone that a number of statements being made today will be forward-looking in nature. Please remember

that such statements are only predictions. Actual events and results may differ materially as a result of risks we face including those discussed in our registration statement on form F1, which was filed with the SEC on July 16th 2021.

We encourage you to review the information contained in our earnings release today in

conjunction with our associated SEC filings and F1. The company does not assume any obligations 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 of results and believes this information may be informative to investors in gauging quality of our financial performance, identifying trends in our results and providing meaningful period-to-period comparisons.

For reconciliation of the non-GAAP

measures presented in this document please see the company s most recent quarterly earnings press release. With that I ll hand the call over to Franco Stevanato for opening remarks.

Franco Stevanato Thank you, Lisa. We are pleased with another successful quarter. Our strong financial results reinforced the solid fundamentals of our

business, the long-term demand and our leading position in the market. We remain focused on delivery and integrated end-to-end product portfolios supported by our

scientific analytical process and service, all of which are designed to match the rising needs of our customers across the entire drug life cycle from preclinical to commercialisation.

We continue to make progress toward growing our industrial footprint to match demand for our high-value solution as a customer and move up the value chain,

invest in research and development to maintain or accelerate our market-leading position to increase the pipeline of our profitable solutions like Alba, Nexa and our drug delivery system, expanding geographically in the US and China and building a

multi-year pipeline of opportunity heavily weighted in the growing biologic market.

We are investing in the business to deliver sustainable organic

growth that we believe will drive an increased share of the value. Before I hand the call over to Franco I want to thank you, all our employees, for the extraordinary effort over the last 18 months. Their remarkable work during a global pandemic

helps ensure business continuity, support our customers and grow our business.

So in the third quarter we award a 6.7 million discretionary

bonus to employees as a thank you.

Franco Moro Thanks, Franco. Our third quarter featured over delivery on the top line thanks to strong sales

from both segments and better than expected results from the engineering segment. This gives us confidence to raise our full year revenue guidance for 2021 and the bottom end of the ranges for adjusted diluted EPS and adjusted EBITDA.

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For the third quarter we had the strong new order intake of 310 million and a backlog of committed

orders totalling 834 million. We believe that the strength of our results and robust backlog are indicative of favorable customer demands and the growing markets in which we operate.

The positive momentum in new order intake and backlog sets the stage for fiscal 2022 and beyond. An important pillar to our long-term strategic plans is

responding to rising demand for our high-value solutions. In the third quarter high-value solutions represented approximately 23% of total company revenue.

Based on high visibility of our backlog we expect an increased revenue from high-value solutions in the fourth quarter. The trajectory for our high-value

solution is unchanged from the 2021 forecast we previously provided. We still expect that they will contribute approximately 205 million to 210 million for the full year 2021.

Let s turn our attention to strategic investments and capacity-building. The extension of our footprint in the United States marks an important step in

boosting our presence in one of the fastest-growing markets. We broke ground in Indiana, and we are recruiting, hiring and training for key managerial positions. We expect the construction will last approximately 18 months followed by start-up and validation in 2023 with the revenue generation some time between late 2023 and early 2024.

designed to expand production for our EZ-Fill pre-sterilized vials and syringes. These meet the stringent quality and performance requirements needed for biologics and

high-value treatments. These products offer significant benefits to customers by reducing time to market, lowering risk and most importantly reducing the overall total cost of ownership.

The Indiana EZ-Fill hub strengthens our presence in this important region, where we expect to support customers from

design and development through commercialisation. The new facility will also house our North American Engineering after-sales support services. This adds to our existing manufacturing facility in California and our Boston-based Technology Excellence

Center that provides vital scientific and analytical support to customers.

At the same time, we are expanding our production facilities in Italy. Thanks

to our current headquarters that was started in 2016 we have been able to meet increased demand and drive double-digit revenue growth. We recently operationalised two new lines tied to high-value solutions in our Italian facility.

The first is dedicated to EZ-Fill syringes and the second to premium EZ-Fill

vials. As we approach 2022 we are striving to maximise production of high-value products through continuing expansion and optimisation of our industrial footprint. Construction is well underway on a new building in Italy where we are are adding new

glass forming lines to boost EZ-Fill production capacity.

This includes the planned addition of two new lines

devoted to EZ-Fill syringes and one dedicated line for premium Alba syringes. These efforts aim to meet the increasing global demand for premium products. We expect that this will help significantly boost

production output and bridge capacity demands while the US and China projects are underway.

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Our ongoing investments will let us benefit from sector demand trends as customers bring new treatments to

market that require products which are further up the value chain. Our integrated end-to-end solution coupled with our high-growth, high-value solutions are important

elements to creating and driving shareholder value.

During the last couple of months there has been much discussion of constraints on global supply

chains. To date we have not experienced significant supply chain issues, but we have taken precautionary steps to increase the amount of raw material on hand and in some cases, we are keeping more inventory available.

In the short term, logistical costs have created some temporary pressure on our cost structure which has been partially offset by recent operational

efficiencies. Dealing with the rising input costs is a near-term challenge that we are managing carefully.

While contracts with customers are negotiated

individually, in general our long-term contracts include cost escalation clauses that allow us to pass on certain cost increases. This is done regularly, and we adjust our pricing accordingly.

The reality is that no-one is immune to this pressure and this creates an environment where price increases are

largely expected by our customers. We are actively monitoring the situation and we will continue to manage our operation diligently in this dynamic environment.

While the pandemic continues to dominate headlines, COVID remains a tailwind to our business. We are currently working with our customers as they consider a

future transition to single-dose vaccine formats. We can support any mode of distribution whether it is a single-dose vial or syringe. In fact, today we are already supplying single-dose syringes for COVID vaccines, in addition to a range of

multi-dose vials around the world.

Recent news of a pill to treat COVID at the first onset of symptoms is a welcome development. We know that prevention

and care are the hallmarks of a good healthcare system and keeping people healthy. We believe that COVID vaccines and oral treatments will play complementary roles in managing the pandemic.

The relationship will be comparable to that of flu vaccines and Tamiflu. The key take-away according to most health experts is that the pill is expected to

supplement, not replace the current COVID vaccination efforts.

Even without contribution from COVID, we achieved robust double-digit growth in the third

quarter. We believe that our existing foothold coupled with our successful track record in supporting vaccine roll-outs, keeps us squarely positioned to remain a top player in the overall vaccine market.

In summary, our third quarter was highlighted by strong sales, solid order intake, a robust backlog and continued progress of our investments, innovation and

capacity expansion plans.

We operate in growing markets, and we will continue to meet the demand expectations of our clients. With another good quarter

of financial operating results behind us, we are pleased with the trajectory of our business and the foundation for the future. I will hand the call over to Marco to discuss our third quarter results in more detail.

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Marco Dal Lago Thanks, Franco. We re pleased with delivering solid third quarter results and

raising our revenue guidance for the year. For the third quarter, revenue increased 37% to 214.5 million, driven by strong growth in both segments. As a leading player in vaccines, we are proud to support the fight against COVID.

As expected, approximately 16% of consolidated revenue in the third quarter was linked to this ongoing tailwind. The solid fundamentals of our business and

the robust demand for our core products helped us deliver 25% year over year growth excluding COVID. For the third quarter, revenue from high-value solutions grew 29% on an absolute basis and represented approximately 23% of consolidated revenue.

This was lower by one percentage point compared to the prior year period, due in part to total company revenue increasing more rapidly than anticipated.

As Franco noted, we currently expect revenue to increase from high-value solutions and an improved mix.

While we may experience normal quarterly

fluctuations in mix, we still believe that our long-term growth trajectory of double-digit organic growth, the shift to high-value solutions and expanding EBITDA margin remains the same.

Total company gross profit increased 34% to 63.3 million despite higher sales from the engineering segment, which has a lower margin. As a result,

gross profit margin was 29.5%. Employee recognition and reward is an important part of the Stevanato culture, and we awarded a 6.7 million discretionary

out-of-cycle bonus to employees for their extraordinary efforts.

bonus was already included in our full-year guidance that we provided last quarter. This was the primary reason for lower operating profit margin, diluted earnings per share and EBITDA margin in the quarter. This resulted in net profit of

18.6 million or seven cents of diluted earnings per share on a GAAP basis.

As noted in the reconciliation table of this morning s press

release and adjusting for certain items in the third quarter adjusted operating profit margin was 17%. Adjusted net profit totalled 26.4 million or ten cents of adjusted diluted earnings per share and adjusted EBITDA margin was 24%.

Moving on to segment results, starting from the biopharmaceutical and diagnostic solutions segment, third-quarter revenue increased 31% to

172.8 million compared to the prior year. Revenue growth was driven by a 29% increase in high-value solutions and a 32% increase in other containment and delivery solutions over the same period last year.

Third quarter gross profit margin of 31.2% was lower compared to prior year, mostly due to product mix. The segment is expected to benefit from an increased

contribution in high-value solutions in the fourth quarter. Operating profit margin of 18.1% in the third quarter was tempered by mix and the discretionary bonus.

For the third quarter adjusted operating profit margin for the BDS segment was 21.3% compared to 21.2% last year. Moving to the engineering segment which

delivered strong financial and operational results. For the third quarter, engineering segment revenue derived from third parties increased 67% to 41.8 million, compared to the third quarter of last year.

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This segment recorded strong sales from premium products in glass converting and visual inspection machines.

Gross profit margin for the third quarter was 15.4% compared to 11.9% in the same period last year. This also helped deliver operating profit margins of 7.1%. This includes the unfavourable impact from the discretionary bonus.

For the third quarter, adjusted operating profit margin for the engineering segment increased to 9% compared to 0.6% last year. Let s turn our attention