Stevanato Group Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 31, 2023

There are 12 speakers on the call.

Operator

Good afternoon. This is the Corusco conference operator. Welcome and thank you for joining the Stephanato Group Third Quarter 2023 Financial Results Conference Call. Conference. At this time, I would like

Speaker 1

to turn the conference over to Ms. Lisa Miles, Senior Vice President, and Investor Relations. Please go ahead, madam. Good morning, and thank you for joining us. You can find a presentation to accompany today's results on the Investor Relations page of our website, which can be found under the Financial Results tab.

Speaker 1

Conference Call. As a reminder, some statements being made today will be forward looking in nature and are only predictions. Actual events and results may differ materially as a result of risks we face, including those discussed in item 3d entitled Risk Call. In the company's most recent Annual Report on Form 20 F filed with the SEC. Please take a moment to read our Safe Harbor statement including in the front of today's presentation.

Speaker 1

We encourage you to review the information contained in our most recent SEC filings, including our latest Form 20 F filed on March 2, 2023. The company does not assume any obligation to revise or update these forward looking statements to reflect subsequent Conference 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: period comparisons. For a reconciliation of the non GAAP measures, please see the company's most recent earnings press published.

Speaker 1

I will now hand the call over to Franco Stephanato for opening remarks.

Speaker 2

Thank you, Lisa. This morning, we reported our 3rd quarter results with double digit revenue growth and an adjusted EBITDA margin of 27.5%, in line with our near term financial targets. While 3rd quarter revenue in the engineering segment fell short of our expectations, Largely due to timing of revenue, we remain confident that we can achieve our full year guidance. As we highlighted at our Capital Markets Day, The fundamentals of our business remain strong. For the last 50 years, our focus has been on delivering the highest quality products to come from pharmaceutical customers worldwide.

Speaker 2

Our unique value proposition of integrated end to end solutions has helped us become a leading partner of choice. We support the customers through the entire drug life cycle from early stage drug development through commercializations. Our differentiated products embed science and technology to meet the most stringent standards that customers demand. We are currently benefiting from macro trends such as hedging populations, the rise in biologics and bio similar and the shift towards self administration of medicine. We operate in growing end markets, particularly Biologics, where we have built a leadership position in treatment areas such as JP1, monoclonal antibodies and mRNA applications.

Speaker 2

As previously disclosed, our 2022 FDA approvals, we are present in 3 out of 4 of the potential blockbusters, all of which are biologics. Biologics, which are mostly administered through injections, are delivering breakthrough results in patient compare, but they tend to be costly and more challenging to manufacture due to their sensitive nature. These factors are driving demand for high performing drug containment to ensure the integrity and stability of treatments delivery to patients. Moreover, the global pipeline of drugs in development is at record levels with more than 60% in injectable formats. In summary, we believe that these positive trends position us well to capitalize on the many favorable secular tailwinds.

Speaker 2

We are focused on executing against our strategic priorities to deliver sustainable organic growth and build shareholder value. Thank you. I will now hand the call over to Marco.

Speaker 3

Thanks, Franco. Before I begin, I want to clarify that all comparisons refer to the Q3 of 2022, unless otherwise specified. Starting on Page 7. For the Q3 of 2023, revenue increased 11% to 271,400,000 and 13% on a constant currency basis, driven by growth in both segments. While we achieved double digit growth, This is below what we expected for the Q3 sales at the time of our Capital Markets Day.

Speaker 3

Since then, revenue tied to specific engineering contract has shifted to the right, and we expect to recognize the revenue in the 4th quarter. As a reminder, the engineering business is project based with revenue recognized on a cost to cost percent of completion basis, and it can vary from quarter to quarter. The engineering business is comprised of large complex projects that have a long life cycles from start to finish, typically 12 to 24 months depending on the nature of the project. In the Q3, and this demand has outpaced our expectation from a year ago. This is certainly positive for us, but At the same time, it is increasing the pressure on operations for timely delivery.

Speaker 3

Secondly, the pandemic created volatility in supply chains, and we are still working through a bottleneck of work in progress that resulted from the electronic component shortages last year. This combination of strong demand and supply chain volatility placed and lower than expected marginality. We believe we are on the right path to better balance with demand. And Franco will discuss the initiatives we are taking under our efficiency plan. The BDS segment performed in line with the assumption embedded in our guidance.

Speaker 3

We continue to gain traction with our customers with the adoption of High Value Solutions. In the Q3, High Value Solutions represented 32% of revenue compared with 30% for the same period last year. In the Q3, revenue from COVID-nineteen decreased 84% and accounted for approximately 2% of revenue. Excluding revenue from COVID-nineteen, 3rd quarter revenue increased approximately 25%. With our diversified For the Q3, gross profit margin was impacted by the lower marginality in the Engineering segment, the ongoing startup of the new manufacturing plants and higher depreciation.

Speaker 3

As a result, gross profit margin decreased 110 basis points to 30.5%. As we continue to execute our strategic priorities, we are also closely managing our SG and A expenses as And adjusted operating profit margin was 20%. On the bottom line, for the Q3 of 2023, Net profit increased 4 percent to $37,900,000 and we delivered diluted earnings per share of $0.14 Adjusted net profit increased 6 percent to $40,100,000 and adjusted diluted earnings per share were and adjusted EBITDA margin was up 70 basis points to 27.5%. Let's review new orders intake, which increased 4% to approximately $256,000,000 in the Q3 of 2020 We ended the quarter with a backlog of committed orders of approximately 9 $24,000,000 Moving to segment results on Page 8. For the Q3, Revenue from the Biopharmaceutical and Diagnostic Solutions segment increased 6% to $218,900,000 and come 8% on a constant currency basis.

Speaker 3

Excluding revenue related to COVID-nineteen, the BDS segment grew approximately 23%. Revenue from High Value Solutions increased 16% to 86 $2,000,000 and revenue from other containment delivery solutions was $132,800,000 consistent compared with the same period last year. As expected, in the Q3 of 2023, margins in the BDS segment were tempered by rising start up costs and higher depreciation. This was partially offset by higher mix of High Value Solutions. As a result, the segment delivered a gross profit margin of 32.7 percent and operating profit margin of 21.2 Revenue in the Q3 of 2023 from the Engineering segment increased 37% to 52 Engineering project, and we expect to recognize the revenue in the Q4.

Speaker 3

For the Q3 of 2023, Gross profit margin was 18.5 percent and operating profit margin was 11.2%. The decrease in margins was mainly driven by lower marginality on specific projects in progress and to a lesser extent, a lower mix of after sales activity. On Page 9, at the end of the Q3, we had net debt of 227,500,000 and cash and cash equivalents of $64,800,000 As expected, capital expenditures were $107,200,000 in the Q3, and we remain on track with the capacity expansion in High Value Solutions to meet customers' demand for ready to use drug containment. For the Q3 of 2023, Cash flow from operating activities was $33,500,000 which reflects our current working capital needs to support organic growth. Cash used for the purchase of property, plant and equipment and intangible asset was come up to EUR 8,000,000.

Speaker 3

Lastly, on Page 10, we are reiterating our full year 2023 guidance. We continue to expect Revenue in the range of $1,085,000,000 to 1,115,000,000 Adjusted EBITDA in the range of EUR 291,800,000 to EUR 303,800,000 and adjusted diluted EPS in the range of $0.58 to $0.62 Thank you. I will hand the call to Franco.

Speaker 4

Thanks, Marco. Since we provided a full business update at our recent Capital Markets Day, I thought it might be helpful to spend some time focusing on a couple of demand dynamics we currently see within the segments. Let's start with Engineering. The Engineering segment provides us with an important advantage and point of differentiation with our customers. As Marco noted, Demand has picked up over the last year, particularly for vision inspection and assembly lines, mostly driven by the growth in biologics.

Speaker 4

To satisfy demand, we are adding resources, enhancing to increase efficiency and cost optimization. Nevertheless, we expect that it will take some time to work through the current bottlenecks. Turning to the BDS segment, which benefited from COVID-nineteen in 2021 in 2022. Coming into fiscal 2023, we faced a year over year revenue headwind of about come to EUR 80,000,000. Despite this, the PDS segment is on track for double digit growth in 2023.

Speaker 4

However, I would like to point out some differences within 2 of the business lines in our BDS segment as COVID-nineteen revenue winds down. 1st, Our core drug containment solutions or DCS business has more than overcome than COVID-nineteen headwind. Demand remains robust, driven by the need for high performance drug containment and the adoption of ready to use solutions. In the Q3, our core DCS business grew about 10% compared with the same period last year. Excluding COVID-nineteen, Our drug containment business grew more than 25% in Q3.

Speaker 4

The data underpins the clear secular tailwinds that we discussed at our Capital Markets Day. Our investments in capacity expansion are designed to meet this demand. 2nd, and that's expected, We assume this in our guidance at the beginning of the year. While we are starting to see some recovery with certain customers, we currently anticipate that the business will normalize over the next couple of quarters. Nevertheless, the in vitro diagnostic business is a strategic proof of hold that we are leveraging to diversify and extend our core competencies into drug delivery system activities With our unique value proposition of integrated end to end solutions, we are bringing the full and we are winning new business in the DDS space, both CDMO and Proprietary.

Speaker 4

We currently expect that the revenue will begin to materialize from these new business opportunities sometime in the back half of twenty twenty five. We also see a strong pipeline of future projects complemented by opportunities on the engineering side for assembly lines with the growth in biologics and the trends towards the self administration of medicine, this is a natural stepping stone to supporting customer with integrated platforms combining both trans containment and delivery solution down the road. In closing, We are maintaining our full year 2023 guidance and we currently see positive long term trends. We are operating in an environment of favorable demand, growing end markets and multiyear secular drivers. We are working with our customers every day to support their needs across the entire drug life cycle.

Speaker 4

We remain focused on operational excellence and the successful execution of our near term strategic and operational priorities as we aim to complete our capacity expansion projects in the U. S. And Italy, grow the mix of high value solutions, invest in R and D to advance our premium primary packaging and drug delivery systems and build a multiyear pipeline of new opportunities by supporting our customers through scientific innovation to meet their evolving needs. These priorities are specifically designed to capitalize on market trends to drive long term sustainable

Operator

This is the Corusco conference operator. We will now begin the question and answer session. Conference is from Derik de Bruin of Bank of America. Please go ahead.

Speaker 5

Hi, good morning and thank you for So, I appreciate that the engineering segment was below your expectations, but Basically, it was a little bit ahead of what the consensus estimates are looking for, while it was BDS that was below. Could you just talk a little bit about this, in terms of just some of the seasonality, that might have been going on and the ramp come from the line of CFO. In BDS from 3Q to 4Q? And also how much ES revenue got pushed into from 3Q to 4Q? Thank you.

Speaker 5

And I've got a follow-up.

Speaker 4

I start a very nice question, Derek. I start to say something about The situation then, Marco may compliment about the figures. Obviously, we have some ordinary partner for customers that normally drive some And about your question on BDS, yes, we have some impact from In vitro diagnostic that is lower in recovery after COVID, but it's something that we embedded in in our guidance early in the beginning of the year, but also to refer the view about the ECS, where we are enjoying the very strong growth. If you look at the numbers, out of COVID, we are Having 25% more in the Sielza business. So in term of seasonality, again, There is something that is repetitive, but it's not completely new.

Speaker 3

Yes. And about the guidance, we are reiterating our guidance also by segment. We still expect double digit organic growth in both segments and the expansion of High Value Solution with a percentage between 32% to 34% on total revenue. So for the year we are in line with our expectations.

Speaker 5

Got it. And expectation on what got pushed from 3Q to 4Q on the

Speaker 3

Yes, Here inside where some revenue shift from Q3 to Q4. You probably remember our long term And that is based on a cost to cost progress. So matter of fact, we have been able to progress less in Q3 due to lower costs than expected. And this is something that will be recovered in forward with the cost of coherence.

Speaker 5

Got it. And then just one final follow-up. What's on the backlog, what was the net new orders? The book to bill has been trending a little bit less than 1. And just want to know how you're feeling about initial thoughts on If any initial thoughts on how that will flow into 2024, basically you've got a There's a double digit revenue growth expectation for the business for next year.

Speaker 5

Just want to know how the backlog is looking, net new orders and sort of like any initial thoughts on how this will Sort of like flow into revenues for 2024. Thank you.

Speaker 3

What I can tell you about the backlog and Franco will comment about 2024 is that we have confidence in our guidance for 20 23 because we are covered for about 97% of the center point of our guidance. And all the remaining first portion of our EUR 924,000,000 backflows is associated to revenue will be recognized in 2024. So this is the starting point and I just reiterate the message that this is Not the only KPI we have for visibility of the future growth. And about the future growth, we are also the message we delivered during our Capital Markets Day, where we see on average low double digit growth toward 2027.

Speaker 5

Thank you.

Operator

Next question is from Paul Knight of KeyBanc. Please go ahead.

Speaker 6

Franco, could you talk about capacity expansions? I know Latina has opened status of Indianapolis? And then does the Engineering segment need to expand capacity as well. Thank you.

Speaker 4

Hi, Paul. Yes, I go through your questions, starting from Saying that we are on track on our capital expansion, our capital execution. And Moving from Latina, Latina is going to generate the 1st commercial revenues, in line with our expectation. I am glad to say that we positively received also first audit come from certification bodies and customers. So we are very glad about the start up of Latina.

Speaker 4

We are in the same trajectory in future where we And also the staff moving from Italy to Fisher to help our new colleagues there. So we are very positive in the view about these big investments. And you are right, we are also supporting our growth and our customer needs in engineering, Heading resources not only to overcome the temporary challenges we are facing, as Marco noted in his comments, Atosio to prepare the stage for next step of growth because the success of our technology in the market is higher than expected at IPO. And we are scaling up the rating as a supplier of High hand technology, visual inspection and assembly.

Speaker 6

On the engineering segment, is this demand Largely monoclonal antibody or is there some GLP-one demand out there?

Speaker 4

It's Biologics. Biologics is growing fast and Biologics is an area where Water injector pants play a major role. That is a good driver not only for assembly line in devices, but Also because they need to use a device, there is a containment solution, high value containment solution that needs So overall, it's a very interesting area of our business and Biologics is the most important driver.

Speaker 1

And Paul, just as a reminder during our Capital Markets Day, we did outline that we are serving GLP-1s with engineering lines as well.

Speaker 7

Okay. Thanks.

Speaker 1

Sabrina, next question please.

Operator

The next question is from David Zingling of Jefferies. Please go ahead.

Speaker 6

Hi, thanks. I wanted to come back to a couple of Derek's good questions. 1 on The engineering revenue push out, if the straightforward question is, could you please quantify the revenue You talked about cost to cost. But if you would please quantify the revenue amount that got pushed out.

Speaker 3

You mean the shifting from Q3 to Q4? Yes, please. Yes. It's about €5,000,000 to €6,000,000

Speaker 6

Got it. Thank you. And then, Marco, you said in your prepared remarks, you made a comment about managing SG and A percentage than we were looking for. I wonder on the point of managing those costs closely, do some of those Cost need to come back? Was there some delay in spending given the lower revenue?

Speaker 6

Or are you managing to a more efficient Level of operation where you can sustain the lower levels that we're seeing in the Q3?

Speaker 3

We are carefully managing, not postponing cost, Obviously, so it's the second one. You can see we are well in line with our R and D expenditure. We are between 3.3% to 3.4% in the 9 months, so in line with our expectation. We are taking some cost in sales and marketing and G and A to manage efficiently our P and L.

Speaker 6

Okay. And then last question for me. On the order book question, say, closer to your IPO period, we were still in the pandemic. Lots of players were receiving orders that where clients were looking further out into the future, willing to do that Because of supply chain challenges, managing inventory, higher levels of demand, a lot of different reasons. And as a result of that, some of your backlog at that time would have lapped not only into the following year, but into the year after that.

Speaker 6

So if I bring forward to current, that would be out into fiscal 'twenty five. Does your current committed order book include 25 orders or has that kind of compressed from a forward visibility timeframe standpoint in customers' eyes? Hope that question

Speaker 3

makes You're right. The order partner, we experienced a change from the pandemic period to the now and that We have only small piece of contract related to the engineering that is going beyond end of 2024, but is related more to the nature of the contracts rather than the fact that customer are ordering 18 months in advance as it happened during the pandemic.

Speaker 4

But also to say that it doesn't mean that our contain or enhance our visibility for the future is the pace to flow a committed order, the

Speaker 6

Understood. Thank you for those answers. Appreciate it.

Speaker 1

Thanks, Dave. Sabrina, next question please.

Operator

The next question is from Patrick Donnelly of Citi. Please go ahead.

Speaker 8

Hey guys, thanks for taking my questions. Franco, maybe one

Speaker 9

for you. As the quarter progressed,

Speaker 8

did you see any change in behavior from biopharma customers? Just given broad peer commentary around more cautious spend, maybe tighter inventory management from that customer base. Just curious what you saw and if things changed at all as the quarter went September, October, whatever it may be, would be helpful just to kind of talk through the

Speaker 4

I hope to have a well understood your question and please correct me if I'm not giving the right But in terms of the behavior of customer about orders, in Biologics, [SPEAKER CARLOS GOMES DA SILVA:] We see the tendency to secure the supply chain, not only for the short term, but also for the long run. [SPEAKER MARCO TRONCHETTI PROVERA:] So we are engaged with the customers, important customers in planning our capacity according to their future needs. So [SPEAKER CARLOS ALBERTO PEREIRA DE OLIVEIRA:] The impact on Biologics because of the inventory built during the pandemic is very minor [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Because you may recall that COVID-nineteen situation was overweighted in bias and biologics is mostly looking committed to orders, but we see really high attention to secure the supply chain for the long run.

Speaker 8

Okay. So you didn't really see a change as the quarter progressed with biopharma customers maybe being a little more cautious

Speaker 4

I I don't see big changes in this direction. The only message I can deliver is that they need to get ready To meet the customer demands in the coming years is a good reason to work together with customer and they are very keen to Have agreement with us for not only the short term, but also the much longer run.

Speaker 8

Okay. And then Marco, Maybe just as we think about both the ramp up of plan that engineering revenue that you talked about the push out coming back in 4Q. Maybe just how do we Think about the margin profile in 4Q and the right jumping off point for 2024 just getting the moving pieces here? Thank you.

Speaker 3

We are, let's say, confirming our margin for BDS segment. We see there are both Our gross profit margin compared to last year in the BDS segment on an adjusted basis excluding the non recurring costs associated to the start up. In Engineering, we see a slight decline in the year compared to the previous one in gross profit margin. But as discussed with David, the other action we are putting in place is a cost management, especially in sales Market in G and A that display favorably for the end of the year. So that's the reason why we are reiterating our guidance for 2023, we expect also to adjust the EBITDA and EBITDA

Operator

comes from Larry Solow of CJS Securities. Please go ahead.

Speaker 7

Great. Good morning or good afternoon. Thanks for taking the questions. I guess just first question, you guys mentioned a nice improvement or are you Seeing a good increase in demand in the Vision, Inspection and Assembly Lines. And just talking through and coming out of Cabo Market Day, Your ability to leverage this engineering segment, are a lot of these customers who where you've seen that demand for the machinery, are they customers as well on The BBS segment, can you kind of just talk about that dynamic?

Speaker 7

Yes, you are right.

Speaker 4

There are many customers that use our [SPEAKER CARLOS GOMES DA SILVA:] So the share of customer that we serve more than With a single product line is increasing and is in line with our strategy to be a solution provider because we We believe that the integrated offering leverage on the engineering provides benefit to customer in time of a shorter time to market, Your product on ICG is increasing.

Speaker 3

Got

Speaker 7

it. And just to clarify, you guys I You don't guide to the quarter and you certainly don't guide particularly to the quarter for the segment. So just some Follow-up to a couple of questions asked earlier, I think by Derek, just on the BBS segment. So it sounds like that those numbers were essentially in line with your expectations. So the $5,000,000 or so shortfall is relative to And internally was all on the engineering piece, correct?

Speaker 3

Yes, that's correct. We are On our side, reiterating the double digit organic growth in BDS segment. And this is how we can see the picture for the entire fiscal year with a strong growth in High Value So we are reiterating these. And as you said, we generally don't provide quarter after quarter Quarterly guidance. And our picture is still the same.

Speaker 7

Got you. And that guidance obviously implies a pretty nice pick up in Q4. And I guess seasonally, the BDS segment normally does pick up significantly in Q4. I assume that dynamic comes into play this year as well, but was that supply chain that supply And your ramping capacity, I guess that's helping that trend even more. Any thoughts there?

Speaker 4

No, but you already covered your question with the appropriate answer Yourself, because yes, it's a combination of new capacity coming online, specifically for high value solution that is more effective in term of revenues. At the same time, there is some repetitive pattern in term of ordering by customer that is [SPEAKER JEAN FRANCOIS VAN BOXMEER:] The margin is driving this distribution of revenues along the year, but the increasing capacity is the most important driver because We are having more capacity in High Value solution.

Speaker 7

Right. And then just last question, just on price. Any color there? I imagine you've been getting a little bit more price this year. I mean, you've probably increasingly over the last couple of years of inflation, Obviously gotten significantly more material.

Speaker 7

Your expectations as we go forward, you continue to expect to get price More in line with, I guess, what the inflationary pressures are?

Speaker 3

Our approach about pricing It's basically depending on value with respect of the value solution. It's not just based on cost, first of all. Without Actually, pressure you mentioned last year, we discussed many times the sudden increase in Cost of utilities and other specific items. But the approach, just speaking, is the same. We are frequently recalculating our cost basis, including inflation and price accordingly.

Speaker 7

Great. Thank you. I appreciate the color.

Speaker 1

Thank you. Thanks, Sabrina. Next question please.

Operator

The next question is from Jacob Johnson Stephens. Please go ahead.

Speaker 10

Good morning. This is Mac on for Jacob. Just a couple of quick ones for me. You highlighted at your Investor Day that you're tied to roughly 70% biopharma companies. With new capacity and new product launch, Is there an opportunity for your win rate to be higher on new molecules coming to market?

Speaker 10

I know you mentioned the 3 out of 4 potential blockbusters, but just going forward,

Speaker 4

Yes, you're right in terms of what we deliver during the market day. [SPEAKER

Speaker 6

DANIEL MARTINEZ VALLE:] And yes, we

Speaker 4

are engaged with important blockbuster coming to the market [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] In the short term and to have a bigger volume in the future, there is no changes in this perspective. I want to just to stress the fact We are talking about biologics in term of kind of molecules that come into the market and the needs for biologics are Perfectly matching our value proposition in a high value solution and a high value containment solution. But nothing different from what we deliver during the market Capital Market Day.

Speaker 10

Thank you. And also you talked a little bit about contracting your Capital Markets Day as well. Just quickly, what did you learn from contracting during COVID, when it becomes when it comes to large demand projects and how does this impact GLP-one contracts?

Speaker 4

I cannot talk about any specific therapeutic area, but generally speaking, by different Engagement of the customer, including some support to CapEx sometime. So it's case by case negotiation, obviously, but the good starting point is the strong relationship we have and the fact that we can leverage on a long lasting experience with this customer.

Speaker 7

Great. Thank you

Speaker 2

for taking my questions.

Speaker 1

Thank you. Sabrina, next question please.

Operator

The next question Conference from Matt Larew of William Blair. Please go ahead.

Speaker 11

Hi. Sam Martin on for Matt

Speaker 7

Larew on for Matt Larew. Just a few So first and foremost, building off to

Speaker 6

some of the questions

Speaker 7

that people ask about contracts and

Speaker 8

the structure there.

Speaker 9

Peter, just another credit

Speaker 7

in the Pharma Packaging space. You spoke about

Speaker 11

a delay in revenue as a result of the between their what customers wanted and their ability to improve lead times. So, given that we weren't able to have the customers already had

Speaker 1

This is Lisa. I'm not sure I don't believe you've dialed in the web phone this morning. So we are having Difficulty hearing you. We cannot hear your question really at all. So I'm going to ask Sabrina to go to the next question.

Operator

The next question is from from Jon Sorbrier of UBS. Please go ahead.

Speaker 9

Hey, thank you for taking the question. I'm actually dialing in. I just want to make sure you can hear me fine here.

Speaker 1

Yes, we can.

Speaker 9

Great. Franco, appreciate the color on some of the sub segment level on BDS. And just maybe on IVD, would you be willing to quantify what the sizing of this is or what you're actually seeing On the non COVID growth there within BBS?

Speaker 4

John, we don't complete in this space, the revenue I can reinforce the message that is in time of Value in the total revenue is represented as more part of revenue also in the segment. And the message about Our interest in the mitral diagnostics linked to the strategic view because we can leverage on [SPEAKER JOSE RAFAEL

Speaker 7

FERNANDEZ:] Expertise, the skills and

Speaker 4

know how that we apply for molecular diagnostic, also in the drug delivery device space. So is this level of synergies that drive the strategic attention in terms of revenues, it represents a minor

Speaker 9

Got it. And just to clarify, I guess, the comments on ordering patterns And backlog demand, but are there any areas where you're seeing destocking or restocking within customers in BDS?

Speaker 4

[SPEAKER CARLOS ALBERTO PEREIRA DE OLIVEIRA:] I can repeat what we delivered in the past about situation in buyers and consumable for highly differentiated portfolio in our revenue. So we are impacted a very limited way. And as you know, We haven't been able to compensate with the expansion in other therapeutic areas or product lines, Overweighting the space for high value solution for biologics.

Speaker 9

I got it. So just to clarify on that. So I guess, In Drug Containment Solutions, there's not areas where you're seeing any customers destocking

Speaker 4

coming down? No, no, no. [SPEAKER CARLOS GOMES DA SILVA:] It's the opposite. We have to execute properly our capacity expansion plan to meet their strong demand. It's the opposite.

Speaker 4

There is no this kind of situation you are referring to in the high value

Operator

Ms. Myles, gentlemen, There are no more questions registered at this time.

Speaker 1

Thank you, everyone, for joining us today for the

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