Stevanato Group (NYSE:STVN) held its second-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.
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Summary
Stevanato Group reported an 8% year-over-year revenue growth to $302 million for Q2 2026, driven by a 9% increase in the Biopharmaceutical and Diagnostic Solutions segment and a 16% increase in High Value Solutions revenue.
The company completed the divestiture of its California-based subsidiary, Balda C. Brewer, to focus on high-value, integrated drug delivery systems, which is expected to be accretive to margins.
Strong demand for injectable biologics, particularly GLP-1 therapies, is driving growth, with Alina's regulatory approval in Europe marking a significant milestone for Stevanato's proprietary drug delivery systems.
The Engineering segment saw a 2% decline in revenue but improved margins due to optimization efforts, with ongoing growth investments in new plants in the US and Italy to meet rising demand.
The company narrowed its full-year guidance, expecting revenue between $1.26 billion to $1.28 billion and adjusted EBITDA between $335 million to $345.2 million, with a focus on expanding High Value Solutions to capture growing opportunities in injectable therapies.
Full Transcript
OPERATOR (Operator)
Good afternoon, this is the Chorus Call conference operator. Welcome and thank you for joining the Stevanato Group half year 2026 financial results conference call. As a reminder, all participants are in listen-only mode and after the presentation there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing zero on their telephone. At this time I would like to turn the conference over to Ms. Lisa Miles, Chief Communications and IR Officer. Please go ahead, Madam.
Lisa Miles, Chief Communications and IR Officer
Good morning and thank you for joining us. With me today is Franco Stevanato, Chairman and Chief Executive Officer, and Marco Delago, Chief Financial Officer. We have posted a presentation to accompany today's results on the Investor Relations page of our website, which can be located under the Financial Results tab. I want to remind everyone that some statements being made today are forward looking and based on current expectations. Actual results may differ materially due to risks outlined in Item 3D, Risk Factors, of our most recent Annual Report on Form 20-F filed with the SEC.
Please review the safe harbor statement included at the beginning of today's presentation and in our press release. The company undertakes no obligation to revise or update these forward-looking statements except as required by law. Today's presentation may include non-GAAP financial information. Management uses these measures internally to assess performance and believes they may be helpful for investors in evaluating the quality of our financial results, identifying trends in our performance, and providing meaningful period-to-period comparisons.
For a reconciliation of these non-GAAP measures, please refer to the company's most recent earnings press release, and with that, I'll hand the call over to Franco Stevanato.
Franco Stevanato, Executive Chairman
Thank you for joining us. Today we review our second quarter performance, share an update on market trends in our two segments including our investment projects, and discuss the current environment. Our second quarter financial results were largely in line with our expectations, highlighted by solid revenue growth and a better mix of high value solutions that drove expanded margins and adjusted EBITDA of 26%. Revenue grew 8% year over year, driven by a 9% revenue increase in the biopharmaceutical and diagnostic solutions segment, which offset a slight decline in the engineering segment.
Revenue from high value solutions grew 16% and represented 45% of total company revenue in the second quarter of 2026, driven by a 30% increase in revenue from biologics, the fastest growing end market. Revenue related to GLP-1s was approximately 22 to 23% of total company revenue. As we disclosed this morning, we completed the divestiture of our California-based subsidiary Balda C. Brewer, which specializes in contract manufacturing services primarily for consumables and point-of-care diagnostic applications.
This initiative represents another step consistent with our long-term goal to continue optimizing our footprint and accelerating the transition towards more complex, differentiated, and integrated drug delivery systems. On behalf of management, I would like to thank the Balda team for their dedication and contribution to our group over the years. Demand for injectable biologics remains strong, with more than 9,000 injectable assets in the global drug pipeline undergoing clinical evaluation or registration, and more than 60% of those are biologics.
Our strategy is firmly anchored in the higher value subsets of the market, and the business is positioned as a leader in biologic applications. The rapid growth of biologics, GLP-1 therapies, and increasing patient adoption of the self-administration of medicines is reshaping how pharmaceutical companies approach product development and commercialization. Drug delivery systems are playing an increasingly strategic role in the success of injectable therapies.
As a result, we see strong customer demand for integrated solutions that combine device innovation, manufacturing expertise, and supply chain reliability. We believe our broad portfolio of drug delivery platforms and our end-to-end capabilities position Stevanato Group well to support this evolution. With this goal in mind, we are extremely happy that one of our pharmaceutical customers has received regulatory approval in several European countries for a liraglutide-based therapy that incorporates our proprietary Alina variable dose pen platform.
The approval represents an important commercial milestone for our proprietary drug delivery systems and includes two Alina variants for both diabetes and weight management applications. This important customer project also embeds our world-class cartridge technology into the Alina pen platform, harnessing the power of our integrated capabilities. Our proprietary devices are manufactured at our facility in Germany, which plays a pivotal role in serving our global pharma and biotech partners.
While Alina addresses the need for a variable dose pen platform, we also see a growing market opportunity for treatments that require strict patient adherence to dosing regimens. In response to customer feedback, we recently introduced Deora to meet this need. Deora is a novel multi-use fixed dose pen injector system compatible with prefilled cartridges, delivering volume up to 3 mL. This new product will take time to get to commercial stage, but we see this as a promising future opportunity.
Our customer needs are clear, pointing at solutions that enhance patient usability and adherence, de-risk supply chain, provide a better answer to new drug product requirements of modern formulation, and lastly increase the combination product sustainability and cost efficiency profile. We believe we have the right set of expertise and competencies to support our customers with a broad and unique value proposition. Let's turn our attention to the engineering segment.
We are pleased with the continued operational and financial progress in the business. Our second quarter results demonstrate that the initiatives taken under the optimization plan are yielding positive results. Overall, the operations have stabilized and we are continuing to execute our optimization plan. As we mentioned last quarter, the teams are laser focused on sales and marketing efforts to expand our opportunity set. We made good progress during the second quarter in winning new orders.
We are cautiously optimistic, but sales cycles are longer today than in previous years. Let's turn to an update on our growth projects in the US and Italy. In the second quarter we remained focused on scaling and executing our growth investments with a disciplined approach, strengthening our operational maturity while expanding capacity to meet customer demand. Starting from Fishers, we recently completed the initial performance qualification on the first EZ-fill vial line and we expect to launch customer validation in the near term.
The build-out for our first device program remains on track and we continue to expect commercial production to begin later this year. As these initiatives come together in Fishers, we are expanding our commercial capabilities and reinforcing our position for future growth. Turning to Latina, the syringe ramp-up is ongoing as we continue to validate new customers. In addition, our next-generation RTU 400 cartridge line is expected to be completed and installed in the next couple of months, with commercial production expected in 2027.
In summary, our second quarter results were in line with our expectations, reflecting the continuous strength of our strategy. We are positioning the business around the most attractive areas of the market, particularly biologics, GLP-1 therapies, and integrated drug delivery systems. The divestiture of Balda C. Brewer and our continued investment in platforms such as Alina and other premium products reinforces our focus on higher value differentiated solutions that address the evolving needs of our pharmaceutical customers.
At the same time, we are making progress in improving the engineering segment and advancing our growth investments. I'll turn the call over to Marco for a review of our financial performance.
Marco Dal Lago, CFO
Thanks, Franco. Before I begin, I'd like to clarify that all comparisons refer to the second quarter of 2025 unless otherwise specified. Let's start on page 10. In the second quarter of 2026, revenue grew 8% to $302 million, both on a reported basis and at constant currency rates. This was driven by a 9% growth in the BDS segment, which offset a 2% revenue decline in the Engineering segment. Revenue from High Value Solutions increased 16% in the second quarter to $135.9 million and accounted for 45% of total revenue.
In the second quarter of 2026, gross profit margin increased 60 basis points to 28.7%. This was driven by the combined improvements in Latina and Fishers, which led to an increase in High Value Solutions and improved marginality in the Engineering segment. This was partially offset by the expected increase in depreciation, higher utility costs and, to a lesser extent, currency headwinds. In the second quarter of 2026, we completed the sale of our California-based subsidiary Baldassi Brewer, which specialized in contract manufacturing services for consumables and point-of-care diagnostic applications.
As a result, the company recorded one-time expenses of $12.2 million in connection with the sale and related transaction costs in the second quarter of 2026. The subsidiary was expected to generate revenue of approximately $30 million in fiscal year 2026, and the transaction is expected to be accretive on the full-year margins. The sale of Baldassi Brewer and, to a lesser extent, higher start-up expenses unfavorably impacted the group's operating profit margin in the second quarter, but on an adjusted basis, operating profit margin increased 250 basis points to 18%.
As expected, the tax rate in the second quarter 2026 was higher compared with the same period last year. As a reminder, the prior-year period benefited from a tax incentive which lowered the Italian statutory corporate income tax rate in fiscal year 2025, but the incentive was not available in 2026. Additionally, there is no corresponding tax benefit on the sale of Baldassi Brewer, which contributed to the increase in the effective tax rate in the quarter.
As a result of the one-time expenses related to the divestment and higher taxes, net profit totaled $23 million and diluted earnings per share were $0.08 in the second quarter 2026. On an adjusted basis, net profit increased 20% to $37.6 million and adjusted diluted earnings per share increased to $0.14. Adjusted EBITDA increased 21% to $78.7 million and adjusted EBITDA margin increased 280 basis points to 26% in the second quarter of 2026. Moving to segment results on page 11: in the second quarter of 2026, revenue from the BDS segment increased 9% to $266.2 million and grew 10% on a constant currency basis.
Strong growth in premium Nexa syringes and, to a lesser extent, Alba syringes and EZ-fill vials led to a 16% increase in revenue from High Value Solutions to $135.9 million, which represented approximately 51% of segment revenue. Revenue from other Containment and Delivery Solutions increased 3% to $130.3 million, mostly driven by growth in standard syringes and bulk cartridges, as well as variable compensation tied to a customer contract. Gross profit increased by $6.6 million in the second quarter of 2026, reflecting the combined improvements in the new plants as we continue to ramp up operations, which led to an increase in High Value Solutions.
These positive trends were partially offset by the expected higher depreciation, an increase in utilities costs and, to a lesser extent, currency headwinds. As a result, gross profit margin decreased by 10 basis points to 31.1%. The operating profit margin was impacted by the sale of Baldassi Brewer and declined 330 basis points to 15.8% in the second quarter of 2026. Revenue from the Engineering segment decreased 2% to $35.8 million due to lower sales in pharma visual inspection and glass converting, which offset growth in the assembling lines and after-sales activities.
In the second quarter of 2026, gross profit margin improved by 540 basis points to 12% and operating profit margin increased 370 basis points to 2.9%. Ongoing efforts under our business optimization plan led to a strong margin expansion as the segment continues to make steady operational and financial progress. Margins also benefited from improved operating results and a favorable mix in our Danish operations from newly secured projects in 2026, which is helping to refresh the project portfolio.
While margins improved in the quarter and the team is making good progress in refreshing the backlog and the pipeline, we continue to remain somewhat cautious due to the elongated sales cycle and project phasing. Please turn to the next slide for a review of our balance sheet and cash flow. We ended the quarter with cash and cash equivalents of $78.6 million and net debt of $360.3 million. We believe we have adequate liquidity to fund our strategic priorities through a combination of cash on hand, available credit lines, cash generated from operations and the ability to access additional financing.
For the second quarter of 2026, capital expenditures totaled $52 million, mostly related to growth investment in the new plants and for our Alina device program in Germany and contract manufacturing activities. In the second quarter of 2026, net cash flow from operating activities totaled $31.9 million. Cash used in property, plant and equipment and intangible assets was $65.7 million. Consequently, the company reported negative free cash flow of $32 million for the second quarter of 2026.
Please turn to the next slide for an update of our full-year guidance. The divestiture of our California-based subsidiary has been considered in our full-year guidance with a reduction of revenue for fiscal 2026 of approximately $15 million. This revenue reduction is partially offset by better-than-anticipated currency translation and higher organic growth in our core business. As a result, we now expect revenue in the range of $1,260,000,000 to $1,280,000,000.
The divestiture, while small, is expected to be accretive to margins at the central point of our guide, and we now expect adjusted EBITDA between $335 million to $345.2 million. We are also narrowing the range for adjusted diluted EPS, which we now expect to range between $0.60 to $0.62 for the fiscal year. Our full-year 2026 guidance assumes the BDS segment is expected to grow on a reported basis high single digits; Engineering is expected to decline by mid single digits to low double digits; High Value Solutions are expected to range between 47% to 48% of total company revenue; free cash flow is expected to range from breakeven to positive $20 million. We are updating the tax rate for 2026 and now expect a tax rate of approximately 28.2% adjusted for the divestment. The higher tax rate is expected to be offset by lower-than-anticipated depreciation and amortization and financial expenses. I will now hand the call back to Franco for closing remarks.
Franco Stevanato, Executive Chairman
Overall, we are pleased with our performance in the first half of fiscal 2026, which was in line with our expectations. It further highlights the continued strength of our core business and our ability to capitalize on the market opportunities in biologics, which remains the most attractive and fastest-growing end market. This momentum reflects strong demand for premium containment and delivery solutions serving complex injectable therapies, including biosimilars, monoclonal antibodies, GLP-1 therapies and other advanced treatments.
With the rapid rise of patient adoption of drug delivery devices, pharmaceutical customers are increasingly seeking integrated partners that can combine device innovation, manufacturing expertise and supply chain reliability. Platforms such as Alina support this strategy. By demonstrating Stevanato Group's ability to bring together drug containment and delivery device capabilities in a differentiated, commercially relevant solution, we believe we are uniquely positioned to respond to this market opportunity.
Overall, we are squarely focused on growing our premium High Value Solutions in both drug containment and drug delivery systems to best position the company to capture the rising opportunities in injectable therapies, particularly biologics. Our goal is to move further up the value chain and deliver sustainable, profitable growth and expanded margins and long-term shareholder value.
OPERATOR (Operator)
Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. To remove yourself from the question queue, please press 2. Please pick up the receiver when asking questions. Anyone who has a question may press 1. At this time we kindly ask you to limit to one question and one follow-up only and join the queue again for any further questions. We will pause for a moment as participants are joining the queue.
First question is from Michael Ryskin, Bank of America.
Avantika, Analyst at Bank of America
Hi, this is Avantika on for Mike. Thank you for taking our question. You updated your BDS growth outlook from single digit to low double digits to now high single digits. Can you walk us through what drove that change and whether it reflects only the divestiture or any other changes in the underlying business? Thank you.
Marco Dal Lago, CFO
Yes, thanks for the question. Marco speaking. The updated guidance on a reported basis, we updated to high single digit. Nevertheless, the organic growth is still double digit because we reduce by approximately $15 million related to this divestiture and, on the other side, we increase for approximately $8 million related to the lower currency headwind. You probably remember at the beginning of the year we started the year with estimation of $18 million of currency headwind on the top line, all related to BDS segment.
After the first half of the year, with approximately $9 million currency headwinds, we can see now the second part of the year more balanced. So we have a total currency headwind in the model of approximately $10 million. So $8 million favorable in currency, $15 million headwind related to the divestiture, and we increased a couple of million our organic growth in our core business.
Avantika, Analyst at Bank of America
Great, thank you for that clarification. And then, as your GLP-1 exposure continues to increase, are you seeing growth broaden across the non-GLP-1 biologics as well, or is GLP-1 still the primary growth driver for HVS?
Franco Stevanato, Executive Chairman
Yes, thank you for the question. So we all know that the GLP-1s are a phenomenal drug class that will continue to represent a strong long-term, durable tailwind in next year. But where Stevanato Group is laser focused in this moment and in the next years to come is on biologics. Biologic is a phenomenal opportunity for Stevanato. Just to give you some numbers: in the industry there are more than 9,000 injectable assets in the global drug pipeline and more than 60% are going to be with biologic through injections administration.
So the reason why we are heavily investing through our plants in Europe and the United States, that we are heavily invested in order to expand our proprietary devices in terms of drug delivery systems and its platform, is in order to try to maximize our leadership position in the next years to come. In biologics in 2026 we have delivered 6% of growth in biologic. Most of the reason is because we are at the early stage, more revenue that we are generating from clients that are in phase two and phase three.
But we have started. The big strategic goal is to be first in these molecules that will represent tailwinds next years to come.
Avantika, Analyst at Bank of America
Great. Thank you so much.
OPERATOR (Operator)
Next question is from David Windley, Jefferies.
David Windley, Analyst at Jefferies
Hi, good morning. Good afternoon. Thanks for taking my question. Wanted to follow up on that and your comments in the release and your prepared remarks about a move toward premium high-value solutions. So Franco, I was hoping, one, you could talk about which products in your portfolio you consider to be the premium products within high-value solutions. And then, presuming Alina is one of those, how many countries and what is the size of the opportunity with this recent approval of Alina for liraglutide?
Franco Stevanato, Executive Chairman
Thank you, David. First of all, let me share that we are so excited and proud because it took Stevanato Group eight years to develop and launch on the market this Alina product. We started with our R&D department many years ago; even more, this is why in 2016 we acquired the so-called Balda. Germany today is going to become a sort of hub in order to produce this IP product for Stevanato Group. So, the fact that now we were validated in Europe, in many countries, for this Alina product, both for diabetes and for weight-loss management treatment, is going to recognize that Stevanato today plays in what we call the Champions League, because we are not serving anymore the product through the CMO business model, but we are serving our IP product. And the difference at Stevanato is that we don't sell only the drug-delivery system. We are selling what we call an integrated system approach, where there are always our glass cartridges inside. Today we are delivering our Alina pen and our cartridges to what we call a system integrator, our specialized partner that is going to take care of what is related to the devices, the cartridges, the filling, and the regulatory support in order to help many big international biosimilar clients both in Europe and the United States to launch on the market this biosimilar. Today Alina is having very strong traction for what is related to liraglutide, which is the treatment of weight loss. But what I would like to underline: we are at a very early stage, because before this validation there was a lot of prudent approach from many clients about the functionality of this device. Today this official registration is opening and boosting the traction of other validations worldwide. And all this production we are going to produce through our plant in Germany.
Like I already mentioned last year, we already started to renovate and upgrade one big area of production in order to start heavily industrial production for Alina in the next years. In parallel, we also started to develop and launch our Deora. That is an evolution of our Alina product that is perfectly fitting for certain treatments where patients need a stronger accuracy of the doses. And the fact that we are already registered on Alina is further helping to boost the medium-term adoption.
So I want to say, sorry to use my Latin approach, that this is going to be maybe one of our biggest milestones in 2026, 2027.
David Windley, Analyst at Jefferies
So to follow up, I presume your enthusiasm suggests to me that Alina and—I'll get the name wrong—AORA are premium products. I'd love to hear what are the other ones that you consider premium within high value. And if you would, of the 47% to 48% of revenue that is high value, what percent of that is currently premium high value? Thank you.
Franco Stevanato, Executive Chairman
Alina is in the range of premium products. The revenue around Alina is already captured in our guidance 2026, and most probably in the next years to come Alina will generate double-digit revenue growth. In the Alina product, where we are also facing strong traction and strong success on the market, is what we call our Alba syringes, because we launched these syringes many years ago for certain ophthalmic applications. Today we see more and more strong traction in customers that are going to adopt monoclonal antibodies.
Also here we are heavily investing in capacity, David, here at the plants in Fumino Daisy. In the next phase we're going also to move industrial capacity into the plants in Fishers in order to serve the biologic market directly from Fishers.
David Windley, Analyst at Jefferies
Okay, thank you.
Franco Stevanato, Executive Chairman
You're welcome.
OPERATOR (Operator)
Next question is from Paul Knight, KeyBanc Capital Markets.
Paul Knight, Analyst at KeyBanc Capital Markets
Congratulations, Franco. The long-term potential, I think, is obvious with Latina and Fishers. What capacity utilization will Fishers and Latina operate this year?
Franco Stevanato, Executive Chairman
So today the demand that we have in Fishers and Latina is quite only 2026. In particular for syringes, Nexa, Alba, and cartridges—bulk cartridges, ready-to-fill—there is quite a strong, robust pull for both plants. The way that we plan our investments is dedicated with capacity programs that we have with customers. All the number of lines that we have installed and validated in Latina will continue to install and do the validation throughout 2026 in Fishers and with direct programs where the clients do the audit, do the validation, and then we have dedicated lines.
Our approach is always to maintain certain free capacity in order to enhance our plans to have the flexibility also to do the sampling and the validation for the future programs that we are going to start to host in the next years to come. So overall the message is demand is strong, but also it's important to keep some space in order to perform the validation.
Marco Dal Lago, CFO
And as a reminder, Paul—Marco speaking—we plan to fully ramp up Fishers by the end of 2028. So we still have a way to go there in improving our production and financial performance throughout our next quarters.
Paul Knight, Analyst at KeyBanc Capital Markets
And then, could you, Franco, give us an update on—you were creating centers of excellence within engineering—where are you in that program?
Franco Stevanato, Executive Chairman
Sure. Today, regarding engineering, we have two centers. One is in Italy, specializing in visual inspection machines for customized lines and certain assembly technology. And Denmark is going to be specialized in particular for the sophisticated high-speed lines for assembly. So the optimization plan initiatives that we started more than one year ago are delivering positive results. In fact, you see, Paul, they are translating also into our revenue and our marginality that are much better in this quarter.
And this is starting to be a signal of trend for the future quarters. So from an engineering point of view, the organization and the team are really moving in the right direction. Also we’re starting to see positive signals because we are more and more having good progress in winning new orders, both with our historical clients, and also we are starting to build a rich pipeline for new clients, in particular for visual inspection. So our goal is really to have, quarter by quarter, some improvement in terms of revenue and marginality in order to be back to original numbers more and more in 2027.
But also here the division has started really to deliver good signals of internal revenue and marginality.
Paul Knight, Analyst at KeyBanc Capital Markets
Thank you.
OPERATOR (Operator)
Next question is from Larry Solow, CJS Securities.
Larry Solow, Analyst at CJS Securities
Great. Good afternoon, everybody. Just a couple questions: you mentioned GLP is 22%–23% of revenue. Can you speak to GLPs versus non-GLPs in the high-value products or biologics growth? Give us an idea what that was. Sounds like GLPs grew faster than overall growth. So can you give us any idea of that?
Franco Stevanato, Executive Chairman
Sure. So today, Franco speaking, the revenue inside of the BDS segment around biologics represents approximately 42%. We moved from where, in 2022, we were approximately a little bit less than 20%. Today we are more than 42%. In this moment GLP-1s are representing a very visible revenue contribution inside of biologics because it’s already commercial. We are serving two big originators and we are actively moving in order to maximize our validations through all the biosimilars, both to our syringes, Nexa, cartridges, EZ-fill.
Also we have many programs around our drug-delivery systems. It’s also true that we are engaged with several hundred clients, from big organizations to small startups, in order to really try to maximize our penetration in all the biologics space. So today, in the biologics space, we have delivered plus 6%, like I was mentioning before, but because most of these programs are at the early stage, they are not representing a big, big revenue generation.
If I can give you a sort of projection, GLP-1 is a well-established, opportunistic tailwind that will continue to grow in the next years, and biologics will be much more spread to many clients and many therapeutic areas. And then if you combine all these opportunities, it’s going to be much bigger in the next years to come compared to GLP-1.
Larry Solow, Analyst at CJS Securities
Okay, great. And then a follow-up just on the Alina, if I could just get a clarification. So it sounds like this approval culminates several years of work, and this validation—feels like you’re not building in a lot of revenue specifically to this approval this year, but this validation opens the door for several other approvals. And I imagine this is multiyear stuff, so you must have other customers in the queue. Is that fair to say?
Franco Stevanato, Executive Chairman
Absolutely. In terms of investments, in terms of revenue—revenue around Alina are already captured in 2026 in our guidance. What we can tell you is that we are heavily investing with industrial commercial capacity in our plants in Germany in the next 12, 24, 36 months in order to be able to serve this growing demand. So, like I mentioned to you before, we count that Alina will help to generate double-digit revenue around Alina products in the next years to come, focused on what we call our premium high-value solution products.
Today we have done the first registration with a certain number of clients, first in Europe. In the second part of the year we will receive additional validations in North America. But what is more important, the fact that now we have this registration on the market is helping to boost and push other traction from other clients, in particular in the biosimilar space for what is related to weight-loss management treatment. So this is the real strategic.
Our industry usually is a little bit prudent and conservative: since there is not a real product on the market, some clients are waiting. Now that this is proven, it is opening a big, big opportunity next year around our IP product.
Larry Solow, Analyst at CJS Securities
Got it. Great. I appreciate that, thank you.
OPERATOR (Operator)
Next question is from Brandon Deegan, Citi. Can you hear me?
Brandon Deegan, Analyst at Citi
Oh yes, thank you.
OPERATOR (Operator)
Excellent, Brandon. Yes, we can.
Brandon Deegan, Analyst at Citi
Sorry about that, don't know what happened there. I was wondering if we could start off by unpacking the engineering performance in 2Q. It's a nice rebound up in 1Q and kind of towards the lower range of the commentary provided on the 1Q call. So I was wondering if you could unpack that a little bit, but then also go into how customer decision timelines have evolved throughout the quarter and what the backlog looks like as we head into the second half of the year.
Franco Stevanato, Executive Chairman
I understood the question—sorry, because there was a lot of noise in the microphone. You asked how is the situation of the backlog compared to the first part of the year to the second part of the year.
Brandon Deegan, Analyst at Citi
Yes, if you could unpack the engineering performance in 2Q.
Franco Stevanato, Executive Chairman
Today we have a healthy pipeline that is going to be, step by step, translated into orders. So if you combine from the beginning of the year to the second part of the year, we are starting really more and more to move this pipeline into orders. In fact, we have very strong progress in winning new orders, in particular for what is related to vision inspection machines, in particular in Europe and in Asia, and technology for assembly for drug-delivery systems in Europe and the United States.
So we see, quarter after quarter, a progression to enlarge the confirmed orders compared to what was the order intake. So the trend is starting to become better and better, quarter after quarter.
Marco Dal Lago, CFO
Yes, thanks for the question about our guidance. I'm staying at the center point of our guidance. Our plan is to expand reported gross profit by approximately 50 basis points if we exclude the one-timer event in the second quarter. Our plan is to increase our adjusted operating profit by 110 basis points compared with last year and, as mentioned in our press release, adjusted EBITDA margin at the center point of the guide is expected to be at 26.8%, expanding 170 basis points compared with last year.
This is driven by slightly improved margin in our BDS segment, improved gross profit margin in our Engineering segment, and disciplined cost management in SG&A and R&D expenses.
OPERATOR (Operator)
Next question is from Mark Etoek, Stephens Inc.
Mark Etoek, Analyst at Stephens Inc.
Hey, good morning, and thank you for taking my questions. Maybe just to follow up on the previous answer, I think you touched on it a little bit. But the variable compensation that you highlighted within the presentation deck — how much was that? How much of a benefit was that to 2Q margins?
Marco Dal Lago, CFO
Thanks for the question, Mark. Marco speaking. So the variable compensation is tied to one specific contract with a long‑lasting customer. It provides a fair compensation for a reduction in volumes compared with the committed volumes from the customer. And as a reminder, under the contract terms and conditions we have protection in place for changes in forecast. So variable consideration compensates us for the costs we had in the quarter, in the first half of the year, in terms of capacity reservation, workers, labor, depreciation, and so on and so forth, plus a fair compensation of the missing margin.
Mark Etoek, Analyst at Stephens Inc.
Thanks for that, Marco. Maybe just to bear down a little bit more on that. Is it possible to quantify how much of a benefit it was to the quarter?
Marco Dal Lago, CFO
No, it's not impacting in a significant way the quarter. It's a fair compensation of the missing margin and the costs we had.
Mark Etoek, Analyst at Stephens Inc.
Got it. Okay, I appreciate that, thank you.
OPERATOR (Operator)
Next question is from Karl Timrusch, Morgan Stanley.
Jason, Analyst at Morgan Stanley
Hi, this is Jason on for Callum. Thank you for taking our questions. So maybe just a question on the Balda Brewer divestiture. Could you just walk us through the strategic rationale for divesting the business and the business profile? What was the growth profile of that business, and what was the HVS/non‑HVS mix for that business? And appreciate the comments that the spinoff was margin accretive, but was wondering if you could quantify that margin uplift.
Thank you.
Franco Stevanato, Executive Chairman
Thank you. So when, in 2016, we decided to enter in the device space, we acted first to acquire Balda, where the big target was the industrial hub in Germany. And when we acquired this company, we discovered there was also a smaller operation in California, in the south of Los Angeles — so we call Balda, specialized more in contract manufacturing of standard consumable product. So when we were starting to develop our R&D center in Milano, more and more our attention focus was to move the standard diagnostic in order to better serve molecular diagnostics.
Now the real goal is really to build a value proposition for our biologic clients in injection, in order to deliver not only the glass, also together with the drug delivery system. Now we are in 2026, where most of our investments are in order to build capacity for drug delivery system. This plant is not anymore strategic for Stevanato because it doesn't have any particular strategy to serve this biologic market. So we have decided to pass through this program of divestiture in order really to remove some industrial setup not strategic for our biologic clients.
Marco Dal Lago, CFO
And about the model, we had previously in our model approximately €30 million revenue for the year and slightly positive EBITDA. So that's why our margin is more accretive with this divestment.
Franco Stevanato, Executive Chairman
This initiative really represents another step in order to move the value chain and the product portfolio — Stevanato industrial setup — more versus some accretive high‑value solution products in order to better serve the biologic market. This is another step, like what we have already done. Last year we started to slow down a little bit our attention in Europe for the standard input.
Jason, Analyst at Morgan Stanley
Great. Thank you for the color. I guess maybe just a question on generic GLPs. We've seen patents for semaglutide expire in 2026 in Canada, India, Brazil, and some early generic GLP launches. I'm wondering, will generic GLPs largely use high‑value solutions as the current branded GLP‑1 drugs? Could you just talk about the opportunity from the generics?
Franco Stevanato, Executive Chairman
So today we serve the GLP‑1 market to our originator, to our biosimilar. We serve the syringes — Nexa — we serve the cartridges, mostly cartridges to fill. Also, we are starting to maximize with all the biosimilar that are entering the market. Today we see that all the biosimilar, they are practically using the same type of administration term — injection. Stevanato is acting to serve these biosimilar that are still at early phases through syringes, Nexa, cartridges, and to fill.
Even more, we have started really to deliver what we call the fully integrated system. We are going to add also our proprietary device like Alina. So this is valid for practically all the regions. Like I was mentioning before, we are starting to serve some European markets. Now the next phase will be North America, Latin America, exactly for this type of configuration where there will be either our syringes or our cartridges, plus the Alina product.
Jason, Analyst at Morgan Stanley
Great, appreciate the color. Thank you.
OPERATOR (Operator)
Next question is from Chad Witabrowski, TD Cowen.
Chad Witabrowski, Analyst at TD Cowen
Hey everyone. Beyond the Balda divestment, are there other segments or SKUs that you view as non‑core and could potentially be under strategic review currently?
Franco Stevanato, Executive Chairman
At the moment we don't have relevant initiative under the radar. It's also true that if you look at it, from the day of the IPO to today, we invested more than €1.3 billion, mostly around high‑value product. It's also true that if you look at the strategy of the organization, starting from sales, R&D, product management, and operations/supply chain, the goal is to build a leadership position in biologics. So indirectly, there are, step by step, a little bit less attention to what we call non‑high‑value product or certain bulk activity.
Make an example: ampoules that we sell from Europe, from Brazil, some other standard plastic components for diagnostic, where step by step we would like really to reconvert, to use this space in order to better serve our EZ‑fill product platform of drug delivery solution. For sure this is something that we do step by step, gradually, because we want really to evolve our value proposition in the next one, two, three, four years. But today, no other relevant initiative.
Chad Witabrowski, Analyst at TD Cowen
Got it. That's helpful. And then, yeah, it was encouraging to see the Alina approvals. Is there an incentive for pharma customers to order from providers who offer both the glass combined with the proprietary device? And are these approvals symbolic of maybe a broader shift over time where companies who offer more integrated solutions are positioned stronger in a market that's historically been pretty fragmented? Thanks for the questions.
Franco Stevanato, Executive Chairman
Today overall there is a trend of the pharma industry to outsource as much as they can. The supply chain can be — they can use specialized CMO, they can use companies like Stevanato that sell the integrated offerings. So this twist — today there is more and more a visible trend where pharma customers try to outsource a big portion of the supply chain. The advantage of these system‑integrated providers: they are very proactive, they don't perform only the filling.
They are helping these biosimilar, international biosimilar companies, really to take all the type of activity in order to collect the devices, the cartridges, do the filling, regulatory support, in order to enhance these biosimilar to focalize in the go‑to‑market. More and more we see this trend in the industry today. And Stevanato, proactively what we do, we use our tech center, we use our specialized hub in Europe, in Italy, United States, in order to try to capture as much as we can big pieces of this supply chain and increase our value proposition.
OPERATOR (Operator)
Next question is from Curtis Moyles, BNP Paribas.
Curtis Moyles, Analyst at BNP Paribas
Hey, thank you for taking my questions. So first, just on GLP‑1s — I mean, obviously that stepped up again as a percentage of revenue compared to 1Q26. So maybe you can talk about how you're seeing that progress through the year and whether your sort of mid‑teens growth guidance remains intact there.
Marco Dal Lago, CFO
Okay. Starting from the guidance, we can see a double‑digit growth compared to last year — so still a significant growth. About the overall market situation, I will hand over to Franco to elaborate.
Franco Stevanato, Executive Chairman
Correct. Today in the industry what we see is that GLP‑1 is really — we are really at the beginning of this journey, because if you look at all the potential opportunities that we have to our originator clients, even more with the biosimilar very active in any region of the world, I think that we are really at the tip of the iceberg. So today there are less than 10% of patient penetration — not total potential addressable patient, that is 1.5 billion.
So we expect that this will continue to represent a strong, long‑term, durable tailwind for all the industry, including Stevanato. The strategy of Stevanato is really to maximize our penetration through the originator, like we have done in the past with insulin, and in parallel try to maximize our presence, our validation, in all the biosimilar not only through our EZ‑fill platform, also with our drug delivery system, because I think the next five to ten years there will be a lot of opportunity to stay in double digit only through GLP‑1 the next year.
What is important, again, to underline for the second time: the GLP‑1 we want to have a very strong opportunistic approach — but it's limited to one therapeutic class. The real goal of Stevanato, and the reason why we have done the IPO in 2021 in order to finance and build this huge hub in the United States and increase capacity in Europe, is because all the biologic market is growing, spread to several tens of hundreds of clients and several areas — this is where we want really to play a visible role.
With all our integrated value propositions, starting from EZ‑fill products, syringes, cartridges, and vials, and move up the value chain to our drug delivery system to certain clients. Through our tech center we are starting to perform also fill and finish for non‑human use. This is where we really want to focalize SG the next five to eight years.
Curtis Moyles, Analyst at BNP Paribas
Okay, thank you. And then moving to the BDS gross margin, I'm just wondering, is this sort of Q2 level a good jumping‑off point for the remainder of the year? Should we see it ramp a little bit from here, or could it maybe come off a bit?
Marco Dal Lago, CFO
Yes, we expect for BDS to match or overtake the gross profit margin we had in 2025. So we expect in Q3 and Q4 further margin expansion in our BDS segment, driven by the growth in Fishers and Latina, and driven by the fact that we expect a stronger second half of the year — so a better leverage on our fixed expenses. Again, mainly driven by Fishers and Latina.
Curtis Moyles, Analyst at BNP Paribas
Thank you.
OPERATOR (Operator)
Next question is from Matt Laro, William Blair.
Matt Laro, Analyst at William Blair
Hi, good morning, and thanks for taking my question. Obviously a lot's been covered. Just one for me. I know you had a press release a few days ago on the Alina approvals you've mentioned a couple times today. I know that these were already approved, so I'm curious if these are new or different configurations and thus perhaps new share opportunities for Stevanato Group. And again, you've covered it a little bit, but just what these approvals mean for you in terms of long-term aspirations in the device space. Thanks.
Franco Stevanato, Executive Chairman
So practically, Matt, with this approval in Europe, and there will be additional approval in the second part of the year in the United States, we are going to start to deliver to a certain number of clients. We have a big number of clients. We're going to start to deliver our Alina pen for this liraglutide product together with our cartridges. So, translated into numbers, we are starting to generate revenue selling Alina in 2026. Now, even more, there will be a progression because these clients are launching the products on the market.
The configuration could be Alina product in these different formats and with our cartridges.
Matt Laro, Analyst at William Blair
Okay, thank you.
Franco Stevanato, Executive Chairman
You're welcome.
OPERATOR (Operator)
Ladies and gentlemen, there are no more questions registered at this time.
Lisa Miles, Chief Communications and IR Officer
Thank you very much to everyone for joining us for Stevanato Group's second quarter 2026 earnings call. We look forward to speaking with you in the future, and enjoy the rest of your summer.
OPERATOR (Operator)
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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