Sartorius Stedim Biotech S.A. (DIM.PA) Q3 2026 Earnings Call Transcript

Operator: Ladies and gentlemen, welcome to the Sartorius and Sartorius Stedim Biotech's 9 months 26 results call. Please note that the call is being recorded and streamed on Sartorius' website. Your participation in this implies your consent to assist. A replay will be available shortly after the call. I would now like to turn the conference over to Petra Muller, Head of Investor Relations of Sartorius. Please go ahead.

Petra Muller: Yes. Thank you, operator, and hello, and welcome to everybody. Joining me today are Michael Grosse, our CEO Florian Funck, our CFO René Fáber, Head of Bioprocessing and CEO of Sartorius Stedim Biotech as well as Alexandra Gatzemeyer, Head of Lab Products and Services. As always, we will start with prepared remarks followed by Q and A. The call is scheduled for 1 hour. Please limit yourself to 1 question to allow as many participants as possible to take part. If time permits, we will, of course, take follow-up questions at the end. Please note that management's comments will include forward looking statements involving risks and uncertainties. And for details of the relevant risk factors, please refer to the Safe Harbor statement in today's press release and also in the presentation. And with that, I am pleased to hand over to our CEO, Michael Grosse, please go ahead.

Michael Grosse: Thank you, Petra, and a very warm welcome from my side as well. I am happy to report a solid set of results for the first 9 months of 2026. With both of our divisions contributing to growth. At the same time, we further improved profitability and generated strong cash flow. This allowed us to continue deleveraging and further strengthen our balance sheet. All in line with the financial priorities we outlined at the beginning of the year. Let me share some high level views here. At the group level, we saw solid growth during the first 9 months of the year. Looking at the divisions, the strong operational sales growth in bioprocessing was driven by healthy recurring business, and the continued recovery of the non recurring business which grew year on year. Overall, this confirms the equipment recovery we anticipated at the beginning of the year and supports our confidence in its further progression. Net pricing services performed particularly well and even exceeded our expectations. Growth was broad based across the portfolio with particularly strong momentum in our Bioanalytics business. And some pull forward in Q3. Here, AI driven drug discovery workflows are becoming an increasingly relevant growth driver. And especially our Octave platform is very well positioned to benefit from this trend and the opportunities it creates. Overall, we are very pleased with our top line performance, especially considering that tariffs surcharges shifted from a benefit to a headwind in Q3 and MatTek is now fully reflected in our organic baseline. If we strip out all tariff effects, our underlying growth actually accelerated compared with the previous quarter. Turning to profitability. Higher volumes, together with continued cost and operational discipline, keep us well on track with our profitability objectives for the group and for both divisions. The combination of profitable growth and continued discipline on working capital translated into a substantial improvement in free cash flow. As a result, we further reduced leverage and continued to strengthen our balance sheet. Overall, are very pleased with the progress we have made so far this year. The positive momentum is based on end markets that remain fundamentally intact. We are seeing healthy pipelines and increasing research activities across our customers which is supported demand for lab instruments and consumables. As these programs move through the pipeline, production volumes increase and so does the need for bioprocessing solutions. In bioprocessing, customers are increasingly focused on improving productivity and efficiency while reducing cost. We saw the strong interest firsthand at our recent process and dedication forum in Gating, which brought together 130 participants from 54 biopharma companies and 30 external speakers across the industry. Discussions range from intensified up upstream processing to continuous downstream manufacturing automations and data analytics. My key takeaway was that the industry is increasingly moving from discussing the potential of process intensification to how to implement it in practice. Sartorius is very well positioned for this transition with technologies spanning the workflows from early process development to next generation bioprocessing. And of course, we do not stand still on the innovation front. First, in BPS, we have expanded our portfolio with technologies that improve oxygen transfer, enabling further process intensification in upstream. And ready to use cytokines in close sterile bags and a new animal component free cell culture medium. Second, in LPS, we added an AI powered IncuCyte module for fast label free stem cell analysis. And a new octet biosensor for faster antibody measurement with less sample preparation. Building on this, let me briefly turn to our outlook. We confirm our full year guidance and continue to expect operational group sales growth around the midpoint of our 5% to 9% range and an underlying EBITDA margin slightly above 30%. For BPS, our expectations remain unchanged why we have refined our expectations for LPS following the strong 9 month performance. We will come back to the details shortly. With that, I will turn the call over to Florian for the financial highlights. Florian?

Florian Funck: Thank you, Michael, and a warm welcome also from my side. Let me start with the group's top line performance. Overall, our top line continues to build on the positive trajectory of recent quarters. First, we are seeing sustained strength in consumables alongside continued growth in our non recurring business. Second, growth is broad based across all regions with APAC performing particularly well also supported by the continued recovery in China. And finally, our Lab division showed substantial growth as the recovery continues to progress. With that backdrop, let's look at the financial results for the period in detail. As a brief reminder, we introduced operational sales growth last quarter. This measure excludes the effect of tariff refunds and corresponding customer compensation. We do not consider this to be part of our underlying operating top line performance. In Q3, we received an additional €5 million in refunds from the U. S. Treasury. This brought the amount received in the first 9 months to €31 million while we claimed approximately €40 million in total. We are still expecting to receive the outstanding amount by year end but there is a level of uncertainty to timing, of course. Correspondent customer compensation reduced sales growth by around 120 basis points in the first 9 months. In Q3 alone, the impact was almost 60 basis points. Excluding this effect, group operational sales grew by 8.1% in constant currencies. Including it, growth was 6.9% in constant currencies. Now turning to the divisions. Bioprocess Solutions continued to deliver solid broad based growth. Operational sales increased by 8.1% in constant currencies. Including the effect from tariff compensation to customers growth was 6.8% in constant currencies. Performance continued to be driven by our consumables business, which delivered healthy single digit percentage growth in the first 9 months of 2026. Core consumables grew at a double digit rate. Please be reminded that our overall consumables business was partly diluted by volatility in our Advanced Therapies portfolio in Q2, which is obviously included in our 9 month view. We continue to expect these ATS orders either towards the end of 26 or in 2027. Overall, recurring business continued to benefit from healthy activity across our customers' drug development pipelines supported by clinical trial activity, new drug approvals, and growing commercial manufacturing volumes. We were also encouraged by the ongoing recovery in the non recurring business, which grew year on year. This confirms our view that the bottom is behind us and that the market continues to improve in a steady consistent manner. Now let's turn to the LPS division. LPS delivered a very strong Q3 that exceeded our expectations. Operational sales grew by 8.3% constant currencies in the first 9 months. Including the effect from tariff compensation to customers, growth was 7.5% in constant currencies. We are clearly seeing positive underlying business trends across the LPS division. But in our view, part of the Q3 performance reflects demand pull forward and timing effects. This should be viewed in the context of a prolonged period of subdued customer and should therefore not be extrapolated as a new run rate. Growth was supported by the recurring consumables and service business as well as by instruments with particular strength in Biolith Analytical Solutions. This was supported by improving biotech funding, rising research activity and a gradual release of customer CapEx. Finally, MatTek contributed approximately 2 percentage points to LPS growth performing fully in line with our expectations. Overall, we are very pleased with the top line performance, especially considering that tariff surcharges turned from a tailwind in the first half into a headwind in Q3. The reduction in surcharges rates from around 15% last year approximately 10% this year represented a growth headwind in Q3 of roughly 40 basis points for both the Group and BPS and roughly 50 basis points for LPS. Taking this into account, our true underlying business momentum remains very solid. Now let's talk about our regional performance. Overall, we saw broad based positive development across all regions in the first 9 months of 2026. Starting with EMEA, sales increased by 6.4% in constant currencies. EPS was the main contributor while LPS also delivered a positive performance. In The Americas, operational sales increased by 8.4% with both divisions contributing. Including tariff related customer compensation, growth was 4.9% in constant currencies. The region was still affected by the Q2 project delays in ATS I mentioned earlier. But Q3 did not show any unusual ATS sales effects. Asia Pacific remained our strongest region with sales by 11% in constant currencies. Both divisions delivered double digit growth. Also supported by a continued recovery in China. Let me now turn to profitability. Overall, we continue to make good progress during the first 9 months of the year. Underlying EBITDA increased by 6.9% to €828 million while the corresponding margin expanded by 50 basis points to 30.2%. As in the first half, higher volumes and operating leverage were the main drivers of this improvement. These effects more than offset an unfavorable product mix and our continued investments in future growth areas. On a net basis, tariff surcharges and the related customer compensation balance each other out and had no impact on profitability of the divisions and the group. Looking at the divisions, Bioprocess Solutions generated underlying EBITDA of €714 million The margin improved by 80 basis points year on year to 32.3% primarily driven by higher volumes and operating leverage. In LPS division, underlying EBITDA came in at €114 million The margin was broadly stable year on year despite our continued investments in future growth initiatives. The clear sequential improvement in profitability was supported by the very strong top line performance in Q3. Overall, we are pleased with the continuous progress and profitability which remains fully in line with our expectations for the year. Okay. So let's move on to have a look at performance below the underlying EBITDA. Earnings as well as cash generation developed well in the first 9 months. Underlying net profit increased by around 7% to €260 million, reflecting the improvement in operating profit discussed earlier. Underlying earnings per share increased accordingly to €3.76 per ordinary share and €3.77 per preference share. Reported net profit attributable to shareholders increased by 51% to €188 million This was primarily driven by the strong improvement in operating profit and significantly lower extraordinary expenses compared to the prior year period. Turning now to cash flow. Where operating cash flow increased to €562 million up around 10% year on year. Higher earnings and the refund of U. S. Tariffs more than offset an increase in working capital. The working capital increase was basically in line with the growth of the underlying business. Free cash flow increased significantly by 55% to €310 million driven by higher operating cash flow and lower CapEx. FX ratio was 9.6%. While capital expenditure remained below the prior year level, we continue to invest in key strategic projects and growth initiatives. Finally, let me briefly turn to balance sheet and leverage. Strong earnings and cash generation supported further balance sheet improvement. The equity ratio that you can see on the chart increased to 42.8% from 39.8% at year end 2025. Net debt decreased to €3.68 billion which is almost €200 million less than 12 months ago and well above €60 million less than at year end 2025. Net debt to underlying EBITDA improved to 3.3x This shows that we are continuing to make good progress on our deleveraging path while still investing in the future growth of the business. Overall, these developments reflect our disciplined approach to capital allocation and our commitment to maintaining a strong balance sheet and solid investment grade credit profile. Before we move on, let me briefly flag an upcoming change to our financial reporting. A new standard called IFRS 18 will become mandatory for financial year starting on or after January 1, 2027. This standard mainly changes the pace of the P and L by dividing it into an operating, investing and financing part and introducing standardized subtotals. It also increases the transparency around our alternative performance measures and how these reconcile the profits shown in the P and L. Today, we calculate underlying EBITDA starting from EBIT and adding back depreciation, amortization and adjustments. Under IFRS 18, we will start with a newly defined P and L line operating profit while the add backs remain quite the same. Most important takeaway from this underlying EBITDA will remain our central profit KPI and the content of this number stays consistent with recent reporting. The new presentation will also not affect net profit or net cash flow. We will disclose underlying EBITDA as a management defined performance measure and provide a reconciliation to the closest IFRS defined subtotal which will be operating profit. So in a nutshell, nothing changes in terms of Sartorius underlying business performance reporting. IFRS 18 mainly changes how certain line items are represented and classified mainly in the P and L and to a limited extent in the cash flow statement. With that, Michael, back to you.

Michael Grosse: Thank you so much, Florian. Now let's take a look at our full year guidance. We confirm our expectations for the group and BPS by raising them for LPS following the strong performance in the first 9 months. At the top of the slide, you see our guidance ranges for sales revenue growth. These ranges cover both our operational view and the expected development, including customer compensation related to tariffs. On an operational basis, we continue to expect growth broadly around the midpoint of our guidance ranges. of 5% to 9% for the group 6% to 10% for bioprocess solutions. For lab products and services, we have raised our expectations and now expect growth around the upper end of the 2% to 6% range. Including customer compensation for tariff surcharges we continue to expect growth in constant currencies to be in the lower half of the respective guidance ranges for the group and BPS. For LPS, we now anticipate growth around the upper end of the range. As a brief reminder on tariffs, we submitted refund applications of approximately €40 million By the end of September, we had received around €31 million are expecting the outstanding €9 million to be paid by year end but there is a level of uncertainty to timing. On M and A contribution, no changes here. The contribution from the MatTek acquisition remains unchanged of approximately 30 basis points for the group, and 1.5 percentage points for LPS. Turning to profitability. Continue to forecast an underlying EBITDA margin slightly above 30% for the group, and slightly above 32% for Bioprocess Solutions. Following the strong development in LPS, we have raised our margin expectations to slightly above 21% compared with our previous expectations of slightly below 21%. Finally, our expectations for the other key financial indicators remain largely unchanged. We have modestly lowered our full year CapEx ratio expectation from around 12% to 512.5% to around 12%. Our expectation for net debt to underlying EBITDA of slightly above 3x at year end remains unchanged. Looking ahead to Q4, we continue to expect solid underlying development with further recovery in equipment and continued growth in consumables. However, Q3 benefited from some pull forward and timing effects in LPS, and Q4 faces a not too easy comparison base across both divisions in absolute million euros. In addition, MatTek is now included in the organic comparison base and tariff surcharges represent a headwind compared to a tailwind in H1. Therefore, the strong Q3 growth rates should not be extrapolated into Q4. Finally, brief update on FX. For the full year, we currently model an FX headwind of slightly more than 1 percentage points on a reported revenue growth For Q4 in isolation, however, we expect FX to turn into a tailwind of slightly below 2 percentage points. Further modeling assumptions can be found in the appendix of this presentation. Overall, our message is straightforward. Our underlying business continues to be strong. Consumables remain strong. The recovery in equipment is progressing as expected and improved visibility reinforces our confidence. In the full year outlook. As you know, our goal is to continue to grow profitably above market. To achieve this, we are focusing on 3 key areas. Our portfolio, the customer experience and operational excellence. Put it simply, want Sartorius to become a more customer centric more focused and more efficient company. To make this happen, we are adapting our operating model and are moving forward from our divisional structure and will no longer manage the business in separate divisional silos. This also means change to the executive board responsibilities. And to our external reporting structure next financial year onward. But before we get into the details, let me first explain the key changes and why we are making them. At our Capital Markets Day, we talked about our ambition to further improve customer experience and become an even better partner for our customers. We want Sartorius to be easier to work with, better coordinated, and simpler to navigate. As our portfolio has become increasingly interconnected customers are increasingly looking forward for complete solutions rather than only individual products. that is why we want to present Sartorius as 1 company with 1 face to the customers, and easy access to our full portfolio. This is why we bring our commercial activities together under 1 organization. Alexandra Gatzemeyer, will lead our global commercial organization as Chief Commercial Officer. Responsible for account management, marketing and customer and technical services across the group. This allows us to present Sartorius as 1 company with clearer ownership, better coordination across our portfolio, and a more consistent experience for our customers worldwide. Second priority, we discussed at the Capital Markets Day was maintaining our innovation leadership while continuously improving operational excellence. To support this, product groups are being brought together under René Fáber, the Chief Product Officer and he will be responsible for research and development product management technical sales and manufacturing. This creates clear accountability and helps bring decision closer to the business and our customers. Last but not least, we created a global operations function under my leadership. Bringing these activities together allows us to establish common standards across the group share best practices more efficiently and effectively and further strengthen our operational excellence. And just to be clear, René will continue in his role as CEO of Sartorius Stedim Biotech and I will continue in my role as Chairman of the Board of Directors of Stedim Biotech. With these changes, I am convinced that we have the right organization set up to deliver on our ambition of becoming a more customer centric more focused and more efficient company. I also believe that we are well positioned for our next phase of growth. In this context, we will also adjust our external reporting as of 2027. And align our segment reporting more closely with our corporate structure. Taking into account our French listed subgroups, Sartorius Stedim Biotech. The 2 segment structure will comprise of 3 building blocks, the former Biopress Solutions Bioprocess Solutions division will become the Bioprocessing Solutions segment exactly mirroring Sartorius Stedim Biotech. As a result, sales revenue and EBITDA differences previously caused by product allocations and considerations no longer exist. Simplifying modeling for analysts covering both companies. The Products and Service division will become the Research Solutions segment. And comprise our business outside Sartorius Stedim Biotech. Consequently, you will also find a separate reconciliation line in our financial reporting which primarily reflects intercompany eliminations. At the end of the day, these changes require only a limited restatement. They do not affect Sartorius Group revenues or underlying EBITDA, and the separate reporting of Sartorius Stedim Biotech remains entirely unchanged. I am sure many analysts covering both Sartorius AG and Sartorius Stedim Biotech will appreciate the modeling simplification that comes with this. We are announcing the intended reporting change early to give investors and analysts sufficient transparency and preparation time. For the 2026 full year results, we intend to report the year under the existing segment structure and additionally provide pro forma figures for 2025 and 2026 under the new reporting structure including a reconciliation. Our 2027 guidance will be presented on the basis of the new structure. Actual reporting under the new segment structure is scheduled to begin with the first quarter 27 results. From that point onwards, we would no longer report the previous BPS and LPS segmentation. In summary, the adopted operating model and the planned reporting structure are both designed to support our 1 Sartorius approach emphasizing customer centricity clear portfolio focus and a simple reporting. With that, I am now handing over to Rene. René, please.

Rene Faber: Thank you, Michael, and good afternoon, everyone. Looking at the first 9 months of 2026, I am very pleased with our performance. The bioprocessing business continued to develop well and broadly in line with our expectations. Demand for Biologics remained robust supporting healthy growth in our recurring business with consumables again making the main contribution. In Advanced Therapies underlying market activity, remains encouraging particularly in earlier stage pipelines. Our equipment business grew nicely year on year confirming an ongoing recovery. Utilization rates continue to increase triggering new equipment orders demand for high throughput process development systems is high, supporting health safety levels of our customers. I am also encouraged by the continued traction of our innovative platforms, which help customers develop processes faster and manufacture drugs in a more efficient way. What I hear from customer is that there is no way around implementing every possible innovation in manufacturing. We have launched new intensified bioreactor that is enabling them to make more product in lower volumes interest in our Pionic intensified downstream platform is high, and we believe our portfolio is very well positioned to support customers as they continue adopting high efficient single use manufacturing. Let's now turn to our financials. Starting with the top line, on an operational basis, excluding tariff related customer compensation, sales revenue grew by 7.8% in constant currencies compared with the first 9 months of 2025. Including customer compensation, sales were up by 6.5% in constant currencies, reaching €2.29 billion. Customer compensation for tariff surcharges amounted to €28 million in the first 9 months including €4.5 million in Q3. Our recurring business remained an important driver of top line growth, increasing at a healthy high single digit rate. Core consumables grew at a double digit rate. The equipment business also continued its positive trend supported by customer investments in process development, productivity and faster timelines. Turning to profitability, underlying EBITDA increased by 4.8% to €716 million. The margin remained robust at 31.3%, improving by 20 basis points year over year. Positive volume effects and operating leverage offset an unfavorable product mix. Tariff surcharges and related customer compensation balance each other out and on a net basis had no impact on profitability. Please note that underlying margin development was stronger than the reported 20 basis points increase suggests, as a higher brand name fee was a 25 basis point headwind compared with last year. We already discussed that 1 in Q1. Overall, a strong margin underscores the strength and the scalability of our business model. Looking at regions, all 3 contributed to growth in the first 9 months. EMEA maintained solid momentum with sales increasing by 6.5% in constant currencies to $982 million In The Americas, operational sales grew by 7.6% in constant currencies including tariff related customer compensation growth was 3.9% in constant currencies. With sales reaching $783 million The region was also still affected by the project delays in Advanced Therapies as Florian mentioned earlier. Asia Pacific was our strongest region with sales increasing by 10.6% in constant currencies to €524 million This development was also supported by continued recovery in China. Overall, the region original picture remains broad based positive contributions from all 3 regions. Let's move to net profit and cash flow. Both developed well during the first 9 months. Underlying net profit grew by 9.3%, 9.4% to €350 million. Underlying earnings per share increased according accordingly by 9.4% to €3.59. Reported net profit increased by 26.7% to €277 million supported by the improvement in operating profit and lower extraordinary items compared with the previous year period. Operating cash flow increased by 11.6% to €498 million as higher earnings and the U.S. Tariff refunds more than offset growth-related increase in working capital. And free cash flow grew strongly by 58.5% to €264 million driven by higher operating cash flow and lower capital expenditure. The CapEx ratio was 10.1% compared to 12.6% in the prior year period. We continue to invest in our global research and production infrastructure by staying disciplined on how we allocate the capital. A quick look at our balance sheet metrics. The equity ratio increased to 54.6% compared to 51.7% at the year end of 2025. Reflecting our strong capital structure and earnings development. Net debt decreased to €2.14 billion. The ratio of net debt to underlying EBITDA improved further to 2.26x compared to 2.38 times at year end of 2025. Overall, these developments underlined a very robust balance sheet position of Sartorius Stedim Biotech. The solid foundation to support future growth while maintaining financial flexibility and discipline. 2 quick points before we move to onto our guidance. First, IFRS 18, which Florian explained earlier, will of course also apply to Sartorius Stedim Biotech reporting as of Q1 2027. Second, let me also underline that the 1 Sartorius approach does not change the reporting of Sartorius Stedim Biotech. SSB will continue to report separately and with the same level of transparency as today. The underlying principles governance and transparency will remain unchanged. So to our guidance, Let me briefly comment on our confirmed 2026 outlook for Sartorius Stedim Biotech. On an operational basis, we continue to expect growth around the midpoint of our guiding range of 6% to 10%. Including customer compensation for tariff surcharges, we expect reported growth in constant currencies to be in the lower half of this range. As a brief reminder on tariffs, we submitted refund applications of approximately €35 million. By the end of September, we had received around €28 million are expecting to receive the outstanding amount by year-end, but there is a level of uncertainty to timing. Turning to profitability, we continue to forecast an underlying EBITDA margin of slightly above 32% for the full year. Finally, we have modestly lowered our full year CapEx ratio expectation from around 13.5% to around 13% reflecting our more focused prioritization of investment projects. Our expectation for net debt to underlying EBITDA of slightly above 2x at year end remains unchanged. FX headwind would be approximately 1.2 percentage points on reported revenue growth for the full year. For Q4, we expect now a tailwind approximately 1.7 percentage points. Michael mentioned earlier, when thinking about Q4, please keep in mind that tariff surcharges will represent a headwind and that we are also facing a demanding comparison base with Q4 last year being our strongest quarter absolute sales. So putting it all together, the underlying business remains healthy The first 9 months give us a solid basis for the remainder of the year Our focus now is on execution and finishing the year strongly. And with that, I will hand over to the operator for the Q and A.

Operator: Ladies and gentlemen, we will now begin the question and answer session. And the first question comes from Zain Ebrahim from JPMorgan. Please go ahead.

Zain Ebrahim: Hello. Zane Ibrahim, JPMorgan. Thanks for taking the question. And I will stick to 1, which is just if you could provide more color on the demand trends you are seeing from customers in bioprocess. Both on the recurring side of the business and non recurring. And specifically, how did market conditions evolve in Q3? It sounds like it is certainly getting better, Florian, from your comments. But if you could maybe elaborate on that. And I think previously, you had a guidance for equipment of flat to slight growth for the year. So what is your latest view there?

Michael Grosse: Could you-- someone get the question in full. I did not understand fully acoustically. You just quickly repeat the main points of the question so the acoustics is not brilliant?

Zain Ebrahim: Sorry. Hopefully you can hear me clearer. It was on latest demand trends in bioprocessing on recurring and non recurring and how that is changing Q3 and what your latest view is on equipment for 2026 revenue growth?

Michael Grosse: Okay. Thanks, Zain, for the question. Let me take that on. I think if we see-- we see and build on the continuation of, first of all, the strong demand base on the volumes for the recurring business parts. We look at our core consumables specifically, see the continuation of the first 6 months of the year as well prolonged in Q3 across the board. Secondly, I think as highlighted or during the presentation, we have seen a strengthening progression in the recovery of the instruments and equipment business. As well quite widely across the regions. Here, I think to outline is really the specific strong demand that we see on the bioanalytics front. And as well on further desktop systems. We expect, of course, this trend to further continue. We have good visibility for the full year, particularly when it gets to the instruments and equipment side. Supporting our full year guidance as we outlined. Thanks very much.

Operator: Then the next question comes from Charlie Haywood from Bank of America. Please go ahead.

Charlie Haywood: Hi, Charlie Haywood, Bank of America. Thanks for taking the question. it is actually on the LPS side. After obviously a very strong third quarter showing an early demand signal there although I appreciate there is some phasing element to that. But I wanted to just understand more broadly how you see the potential opportunity here from I guess, AI and AI driven drug discovery for initially on the bioanalytics and LPS side and then maybe longer term on the bioprocessing side? Thank you.

Michael Grosse: Okay. Thanks, Charlie, for the question. I think the LPS part of this Alexandra will take.

Alexandra Gatzemeyer: Yes, thank you. Let me take part on LPS drug discovery. So if you think about AI drug driven drug discovery, this was 1 of our strategic growth pillar. We were talking at the Capital Market Day. And we already play in this area. So, as an example, Michael was talking earlier in an introduction about IncuCyte for example, where we have collaboration with NVIDIA and we have AI powered assays already on instrument. The second example is Octet, it is FlowBLi system where we have its real time measurement, label free. So we do see this instrument participating in workflows. At the customer side, and we would expect even further grow on innovation into that direction because there is instrument, consumables, software part and of course services.

Michael Grosse: Thank you, Alexandra. Anything to add there, Rene, on the BPS side when it gets to the particularly the i2ism part of this?

Rene Faber: Yes. Maybe what I think it is interesting to see the discussions we are having with our customers who do process development Those discussions are around how to get prepared for the increased number of drugs which are coming due to the AI development and the discovery. So the expectation clearly is it will help. The AI will help introduction discovery to get more drugs into the manufacturing and also increase the success rate of these drugs. And the process development people are already preparing for that, how to deal with the increased numbers. And of course, the high throughput systems like our AMPA system is exactly the solution to deal with that wave which is potentially coming.

Operator: Thank you. Then the next question comes from Matthew Weston from UBS.

Matthew Weston: Thank you. As we look into 2027 and 2028, and we think of the likely demand for new facility fit out, particularly in The U. S in BPS. there is a big investor debate on whether Sartorius will lose share to your competitor with a 5 thousand-liter single-use bioreactor. So my question is really where are Sartorius on scaling up your bioreactor volumes in single use? Do you think it will be a competitive advantage? In particular, what in the Sartorius portfolio gives you confidence that you will win your fair share of the RFPs when they come?

Michael Grosse: Thank you, Matthew. This 1 is for Rene.

Rene Faber: Thank you very much for the question. So first of all, in the what you are saying and this is what we also hear customers are preparing for increase of the capacities customers prefer single use. So single use is the often the technology of choice Now to the volumes, what we see in our discussions and we recently had a nice few platform wins or conversion of competitor's direct the platforms to ours due to the reason that the main driver and the main thinking of the customers is with the improved titers from the process development and intensification of processes the expectation is that the volumes of 2 ks and below covers the majority of the demands of our clients. Of course, we are watching the 5 topic here so far. We see it is rather a quick increase in capacity for these, say, older legacy low tighter processes, which we do not believe is the future. But we are in close in touch with customers to see what they exactly need. Thank you.

Operator: The next question comes from Charles Pittman King from Barclays. Please go ahead.

Charles Pitman: Hi, Charles Pitman-King from Barclays. Thanks so much for taking my question, it is just also thinking about kind of 2027 to 2028 dynamics as we roll forward off a strong year. I am just thinking about potential benefit from this U. S. Reshoring and timings compared to some peers. You previously said you expect orders over 2027, 2028 with late 2027 and 28 orders. I am just wondering if that remains your view given what you have seen over the year so far. And also just if you can provide any further commentary around whether you think this U. S. Reshoring is driven by an expansion or is actually more reflective of a preference to shorten supply chains post COVID and is therefore a bit more structural? Thank you.

Operator: Thank you, Charles for your question.

Michael Grosse: So I take that 1 up here. Yes. So I mean, basically, we stay in line with our indications of the way of how we look at the demand for the years 2027 and 2028 when it gets to particularly the non recurring business and CapEx investments, from the policy changes and the regulatory demands. So we, of course, have been very pleased to see the 1-off brownfield additions and CapEx demands coming from North America already during this year and the second half of this year. So far, At the same time, we do not necessarily say that we would attribute that to reshoring discussions. If we take that we still believe that we see some of the specific groundbreaking is taking place as we speak. We continue to see that the expectation on order intake is there for the later part of 2027 and 2020 and then we will basically spend over a longer period of time. Our judgment so far is not necessarily yet a very structural demand that comes from that. We still believe that there would be a specific regional capacity or global overcapacity be the consequence of those investments? So we see these investments that will come and spend through these years from 2027, 2028 onwards for the coming years. To build up regional capacity particularly for the CapEx investment part. Thank you very much.

Operator: And the next question comes from Subhalaxmi Nambi from Guggenheim Securities. Please go ahead.

Subhalaxmi Nambi: Hey, guys. Thank you for taking my question. You have now delivered roughly 8% operational growth through the 9 months. With consumables healthy and equipment recovering. As you look into 2027, what needs to be true for bioproducts? Solutions to sustain the high single digit growth? And how much confidence do you have that equipment can still become a meaningful contributor rather than the growth primarily coming from consumables? Thank you so much.

Operator: Thank you for your question, Subbu.

Michael Grosse: Yes, I think at this point in time, we do not want to preempt the exciting discussions that we probably will have then in 2027. So there is no need right now for us to talk about 2027 guidance. We are in the middle of our discussions in the executive team and then with the supervisory team to look at our budgets for the future. Of course, we see the momentum on the base demand for our core consumables and broader recurring business to be robust and taking us into the year end. And therefore, there is as well no need to believe that those trends and the underlying demand of our customers in terms of increasing volumes in their output will change. So in this respect, we think this is for sure a guiding principle into the coming year. Again, we think it is too early now as well to make a clear note about how the non business will further develop. However, of course, given the lead times we have a bit better look here. that is the reason why we are rather confident with our projected for this year on the nonrecurring side that we will see a slight growth for the full year. And we see this as a progression of the normalization in that part of the business. Again, having said that, it is important to see that the demands in CapEx investments generally follow a higher degree of cycle. And I would say some volatility on the basis of capacity and capacity utilization. Thank you so much.

Operator: And the next question comes from Odysseas Manesiotis from BNP Paribas. Please go ahead.

Odysseas Manesiotis: Hi, thank you for taking my questions. I wanted to zoom into the LPS division in Q3, please. Could you give us a sense of roughly what proportion you saw from demand coming from analytics? On the AI drug dev, so the Octet and IncuCyte instruments, then broader LPS product demands from biotech funding and also to what extent pull-forwards helped you here? Thank you.

Operator: Thank you for your question, Odysseas.

Michael Grosse: This is 1 for you, Alexandra.

Alexandra Gatzemeyer: Thank you for the question. And yes, we are very happy to see our performance in this 9 months for LPS division. I think fair to say that we would not tell exact numbers of the estimation even on the pull forward from Q4 into Q3. But definitely, the performance is truly driven by consumables or recurring revenue within our So we see that bioanalytic instruments are in use and in high use. At the customer side, it is release of CapEx by academia and biopharma. So execution of the plan projects on which we were working from the beginning of the year. And that is the driver for this. 3 quarters of the performance of LPS.

Operator: And the next question comes from Charles Weston from RBC. Please go ahead.

Charles Weston: Good afternoon. The integration of the functions from the 2 businesses is obviously a major step for the business. So can you tell us how far through this process are you? What do you think the key risks are? And what do you anticipate is benefits? Is there a way that will be able to report on the progress here going forward? In quantitative manner.

Michael Grosse: Yes. Thanks for the question. Appreciate that, Charles. I will take that on. So we started to build this on a progressive basis. The new organization started this summer. And we think that now, of course, we will formalize and have a full life then in the beginning of 27 with these new responsibilities. We are well underway in the company in order to what does it mean in the interfaces, in the direction with the teams. We are driving workshops and alignment sessions. So overall, I think I would say the spirit and the satisfaction with the team on the new structure is there. And people have found mostly their place. Now what does it really bring? I mean, discussed it a bit before, The main driver is threefold. On the 1 hand, we always think that structure needs to follow strategy. So with our clarity that we are going to focus our strategy on the 3 pillar of products and innovation, on customer centricity and operations. it is clear that we want to drive clear accountabilities and focus areas in the operating model with that. Secondly, we think the customers will really appreciate that step with a very clear note of 1 face to the customer to provide a clear entry point, a clear coordination of all efforts and therefore as well a better way of coordinating and an easier way for us to interact. And last but not least, we look at our portfolio and its growing complex complexity always from a total workflow perspective, all the way starting from just drug discovery, molecule development, process development, upstream, downstream manufacturing, and taking as well now a consistent approach for all of our product development and product management across portfolio will drive a strengthening of that part as well. And last but not least, bringing on an operational team in order to set the standards for quality, for operations and drive this in a consistent manner across the supply chain and operations framework will support our appetite for operational excellence improvements. Thank you.

Operator: And the next question comes from Thibault Boutherin from Morgan Stanley. Please go ahead.

Thibault Boutherin: Thank you. Thibault Boutherin from Morgan Stanley. Just it is not clear if the tariff surcharge was funded by all of your competitors. Do you have any customer feedback on what you did in terms of funding this tariffs surcharges? And do you see some positive outcome in your conversations with your customers?

Michael Grosse: All right. Thibault, good 1. Florian,

Florian Funck: Will take that on. Yes. So Thibault, as you can imagine, think it is clear that first of all, we wanted to stay true to our words that if we are charging extra for the tariffs, there would also be refunds. And secondly, this was generally taken up very positively, of course, by the customers. And thirdly, we are currently in the process of getting these refunds out to the customers.

Operator: Then the next question comes from Harry Gillis from Berenberg. Please go ahead.

Harry Gillis: Thank you very much for taking the questions. I want to push a little bit more on what the strength from AI drug driven drug discovery workflows means in practice? Is this sort of AI native companies? Is it biotech? Potentially benefiting from biotech funding? Or is it large pharma companies? In terms of the customer category? And then is it is it customers running more experiments per instrument, so it is higher consumables pull through? Is it a mixture of that and instrument purchases Thank you. And then I think just to follow on actually, said the pull forward or the demand was very strong excluding the pull forward. Can you just give us any sense get comfortable that this was not simply a tender effect or very large pull-forward that fully washes out and it is a signal of true improving underlying demand. Thank you.

Michael Grosse: Thank you so much, Harry, for the question. Alexandra, that is for you.

Alexandra Gatzemeyer: Alexandra Gatzemeyer: Yes. Thank you for the question. Let me start from the answer on the last part. it is fair to say there was no big tender what you are saying, which affects these results, like a 1-time effect. it is rather underlying strong performance across different segments and different geographies. that is the results you can see now. Maybe to explain a little bit more on the AI driven drug discovery on the customer and who do we see looking into these processes and looking into the instruments. So it is actually currently where you could say in the beginning of this journey, we see it at biopharma customers, we see it at academia, which are buying these instruments and running more experiments that they would run otherwise, because you can generate more results in real time with, again, IncuCyte or Octet. And then you can feed your models with this data to create a proposals for new targets. And then you again need to go into the wet lab to test this target. So you actually, at the moment, generate more work in the wet lab through our portfolio and then testing new targets again using the portfolio which we can offer whether through LPS portfolio or as Rene was saying, on the process side, those we see our products being purchased through our customer base. it is maybe not that much by AI companies. I hope that gives you more colors.

Harry Gillis: Right. Very clear. Can I just ask 1 quick follow-up? What are you seeing overall across the entire business in terms of U. S. Academia and government? Thank you.

Alexandra Gatzemeyer: We see the performance maybe slightly improved, but we cannot see maybe the performance we saw years before.

Operator: Thank you so much. And the next question comes from Oliver Reinberg from Kepler Cheuvreux. Please go ahead.

Oliver Reinberg: Yes. Thanks very much for taking my question. I just wanted to talk about China. there is obviously quite some kind of progress in the R and D activities in this kind of country. So can you just talk to your market position in this kind of early stage companies in China? And how that compares to the rest of the world? And out of this discussion, can you also add to what you see generally in terms of local competition which product groups are affected and what kind of demand dynamic do you observe?

Michael Grosse: Yes. Thanks for the question, Oliver. I will take that 1 on. So I mean, first of all, would say we do not necessarily see a different level let's say, of customer segments that we are active and we are well positioned in China compared to other countries. Secondly, I think if we look a little bit into the evolution in China and to the performance that we have seen there now recently, Of course, there is an encouragement by the extra level of activities around the pipeline with the refueling a lot of the demand there on consumables. But particularly as well on the research side. So this I think is rather positive. We see that in, I would say, the biotech side, on the larger biopharma front, on academia, and to some degree, as well, of course, by the CDMOs. So overall, I would say, from our expectation and from our perspective there, we see that is a healthy contribution that we have seen throughout the first half of the year and continuing in Q3. And we have reasons to believe that the underlying demand there will remain. Looking at the approval rates, looking at the extra molecules that come on track on that.

Oliver Reinberg: Can you say a word in terms of where do you see most of the local competition?

Michael Grosse: Yes. We take the local competition, yes, would say, is not a large change in its positioning. So I think the majority of the focus of local competitors remains in the like for like local market. For local production and activities in the biopharma market. And it is as well in the segment mainly active where I would say there is more comparable level of or less differentiated demands or less differentiated product profiles.

Oliver Reinberg: Okay. Thanks very much.

Operator: And the next question comes from James Vane-Tempest Tempel from Jefferies. Please go ahead.

James Vane-Tempest: Yes. Thanks for taking my question. I would like to ask about the bioprocessing market in your position. So we hear a lot about higher titers and demand for single use, but a larger CDMO recently showed some data how most of the volume for biologics is driven by relatively few products in stainless steel. And late stage pipeline likely has lower than what are often cited by bioprocessing players, though there is obviously some flex for hybrid setups. So essentially, now could these changes take 10 to 15 years to play out in practice? So my question is, do you agree with that view in terms of how the titers will take an awful lot longer to come through? And how do you see the single use share in the overall market? And do you see greater relative traction for you and biosimilars than originators? And then my follow-up, if I can, is where do you see the main areas of portfolio differentiation, if portfolio intensification, for example, results in higher media demand if you do not see a way to differentiate in a 5 thousand-liter setup. Thank you.

Michael Grosse: James, thanks for the question. Or for the questions in this case. So we will focus maybe on the first 1. So Rene, that is 1 for you.

Rene Faber: Yes. Thank you. And I try to make it simple. So of course, if you look ahead, there will be high-mix, low-volume products and there will be low-volume, high-mix scenarios. And when we look we look at the pipelines of the customers, what is coming, clearly see that the low-volume, high-mix is coming and growing faster and will be growing faster than a few single blockbusters. Our strategy and our strength of Sartorius is to focus on this low-volume, high-mix scenarios where I believe with and it is clear that the tighter improvements in this process is they are real. Customers are asking for more intensified processes to do more in single use because the benefits are also clear in terms of cost, flexibility, sustainability. So that is where we see our above market growth. But again, a few low-mix, high-volume blockbusters that is real also and will stay there. And of course, our business in this segment sell a lot of consumables in stainless steel facilities. it is not like irrelevant for us. But strategic focus is there where the growth above market is coming.

Operator: And the next question comes from Anna Snopkowski from KeyBanc. Please go ahead.

Anna Snopkowski: This is Anna Snopkowski on for Paul Knight at KeyBanc. Thanks for taking my question. I was just wondering if you could talk to the 14% growth you saw on the lab product side, specifically APAC, which I think grew over 20% in lab products. You Do you think you could just talk through what is driving this strength in APAC? And how much of that growth is coming from China?

Michael Grosse: Thank you, Anna. This 1 is for you, Alexandra.

Alexandra Gatzemeyer: Thank you. Yes. I think we, again, pleased to see our growth in APAC it is again across the portfolio, across the segments, Bioanalytics, as recurring revenue is also supported by services in this region. If you think about China versus APAC, it would be fair to say that China is leading growth there. Driven by our participation in R and D network within the China region. I think that would be my answer.

Anna Snopkowski: Thank you. And then maybe just 1 follow-up. On your overall guidance and talking to the midpoint of the range, do you think you could just walk through any of the swing factors that could get us either to the lower end or the higher end of the range, whether that is equipment recovering faster than expected, or academic spend, just anything you could highlight there.

Michael Grosse: Yes. Thanks, Anna, for the follow-up. I mean, we want to reconfirm our guidance on the basis of really seeing now an visibility for the full year in order to stay with that statement. So as well, we looked at the visibility on the nonrecurring business side. I think we have a very strong visibility towards the year end. Consumers, we have a few weeks to go, but by and large, I think we feel very comfortable with the guidance on stating midpoint guidance for group and BPS. And upper end for NPS.

Operator: And the next question comes from Falko Friedrichs from Deutsche Bank. Please go ahead.

Falko Friedrichs: At a higher level, how far are we from a full normalization of the equipment business? I obviously appreciate that you may not be able to provide a precise time line, but perhaps you could share your high level thoughts on where we currently stand. Thank you.

Michael Grosse: Yes. Thanks, Falko. Difficult question in the sense and again, we do not like to make judgments on something that we do not have the data on The data tells us that we have seen this rather steady and continuous progression in the recovery of the equipment business now for the last few quarters. Again, I mean, the visibility in terms of the order book backlog opportunity pipeline and leads pipeline we think there is a good reason to see that this is not changing dramatically from 1 month to the next month. To make a projection to what it will look like in 2027, we would like to wait until we make our guidance look at our budget and bring this together to the group.

Operator: And the next question comes from Delphine Le Louet from Bernstein. Please go ahead.

Delphine Le Louet: Yes, hello. Hi, good afternoon. Congrats on the result. 2 follow-ups, please. 1 regarding the markets and specifically what you elaborate during the CMD when it comes to the market share from R&D and from the commercial, let's say, drugs in the market already. Have you made any progress in terms of penetration to that dedicated segment? And when you look forward, the entire biopharma market, when do you think we are going to reach capacity? Or what do you have? What can you share with us? What you have in your plan? When it comes to effectively reaching this capacity? Is that for 2035? Is that for later? Is it for never? What is your plan? Second question deals with more the reorg and the impact for Stedim, now that we have BPS being exactly Stedim. Can you share with us if there is anything we need to keep in mind that was at the time of the acquisition and the staging quotation Regarding Stedim, that makes or that makes a sense in the short term to keep the company quoted in the market?

Michael Grosse: Delphine, could you please repeat the background of your last question? We did not get that here.

Delphine Le Louet: Yes. No, the last question is regarding Stedim and questioning about the fact that you have to keep or you need to keep a steady as a separate entity and quoted in the market now that it is completely BPS. Okay.

Michael Grosse: So, I will try to address that second question, if I am trying to understand what you really what you are after. So yes, we will keep the setup that we are having and the legal entity of Stedim. Now, of course, we want to make that simplification really make sure that we have 1-on-1 the same definition of the new Bioprocess segment. As much as the bioprocessing segment as much as the Sartorius Stedim Biotech perspective. So in this respect, there is no need to change. And again, you know that we have as well established that unit is highly under the control of the AG level as well for managing capital inflows. So in this respect, I think that is right now, this is situation. Is there anything you want to add there, Florian?

Florian Funck: Yes, just 1 point. If your question maybe was into the direction of a delisting, this is not in the cards. It is we are very happy with the current situation here.

Operator: Okay. Thank you. Ladies and gentlemen, as there are no more questions, I would like turn the conference back over to Petra Muller, Head of Investor Relations.

Petra Muller: Yes. Thank you, operator. This concludes our call today. Please reach out to the IR team in case of any open questions. Before we close, maybe 1 final point. Some of you may have already noticed in our financial calendar, we are making a small change to our reporting schedule rather than releasing preliminary figures and then publishing the annual report and the URD a few weeks later. We will publish our full year results and both reports on February 23. Since you will have all the complete information available on the same day. We thank you for joining us today and wish you all a blessed rest of the day. Take care, and see you next time. Operator, you may now disconnect.

Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.