Core Insights - Embecta Corp. reported strong financial results for Q3 2025, with an increase in revenues and improved profitability metrics despite a challenging geopolitical environment [2][3][8] Financial Highlights - Q3 2025 revenues reached $295.5 million, an increase of 8.4% year-over-year, with U.S. revenues up 11.6% and international revenues up 5.0% [8][10] - Gross profit for Q3 was $197.1 million, with a gross margin of 66.7%, compared to $190.1 million and 69.8% in the prior year [8][20] - Operating income for Q3 was $94.0 million, with an operating margin of 31.8%, significantly higher than $55.9 million and 20.5% in the prior year [8][20] - Net income for Q3 was $45.5 million, or $0.78 per diluted share, compared to $14.7 million and $0.25 in the prior year [8][20] Nine-Month Performance - For the nine months ended June 30, 2025, revenues totaled $816.4 million, a decrease of 2.5% compared to $837.0 million in the prior year [13][20] - Gross profit for the nine-month period was $518.3 million, with a gross margin of 63.5%, down from 67.1% in the prior year [13][20] - Net income for the nine months was $69.0 million, or $1.18 per diluted share, compared to $63.7 million and $1.10 in the prior year [13][20] Strategic Developments - The company successfully implemented its ERP system and operationalized distribution centers in India, concluding a multi-year separation program [3][5] - Embecta is focused on diversifying its product offerings, including contracts with pharmaceutical companies for co-packaging pen needles with generic GLP-1 drugs [5][8] - The company has made significant progress in its brand transition program in the U.S. and Canada, expected to be largely complete by the end of fiscal year 2025 [5][8] Financial Guidance - The updated fiscal year 2025 guidance includes expected reported revenues of $1,078 - $1,085 million, with adjusted earnings per diluted share projected at $2.90 - $2.95 [14][19] - The company anticipates adjusted gross margins of 63.25% - 63.50% and adjusted operating margins of 30.75% - 31.00% for the fiscal year [14][19] Balance Sheet and Liquidity - As of June 30, 2025, the company had approximately $233.6 million in cash and equivalents, with total debt principal outstanding at $1.489 billion [15][21] - The company reduced its debt by approximately $52.4 million during Q3 2025, achieving its fiscal year 2025 debt reduction target with one quarter remaining [8][15]

Core Viewpoint - Embecta Corp. is transitioning from a company focused solely on insulin delivery to a broader medical supplies company, leveraging its 100-year legacy in the industry [1][3]. Group 1: Financial Results and Operational Update - Embecta will host a conference call on August 8, 2025, at 8:00 a.m. ET to discuss its fiscal third quarter 2025 financial results and provide an operational update [1]. - The call will include a question and answer session for participants [1]. Group 2: Accessing the Conference Call - Participants can access the live webcast through the provided links or via the company's investor relations website [2]. - A replay of the conference call will be available starting at 11:00 a.m. ET on August 8, 2025, and will be archived for one year [2]. Group 3: Company Overview - Embecta employs approximately 2,000 employees globally and aims to improve lives through innovative solutions and partnerships [3]. - The company is committed to advancing its legacy in insulin delivery while expanding into a wider range of medical supplies [3].

Summary of Embecta (EMBC) FY Conference Call - June 10, 2025 Company Overview - **Company**: Embecta (formerly part of Becton Dickinson's diabetes care business) - **Revenue**: Approximately $1.1 billion - **Product Categories**: - Pen needles - Conventional syringes - Safety products for injections - **Geographic Revenue Distribution**: - 50% from the US - ~30% from Europe, Middle East, and Africa - ~20% from Asia Pacific (including China) - ~5% from Latin America - **Business Model**: Focused on single-use disposable products for diabetes management, with a stable and recurring revenue base [4][5][6] Financial Performance and Projections - **Historical Performance**: - Revenue growth from 2022 to 2024 was around 1.3% CAGR, exceeding initial expectations of flat growth [11] - Adjusted EBITDA margins improved to 31.4%, surpassing the target of 30% despite facing inflationary pressures [13] - **Future Projections (2025-2028)**: - Expected constant currency revenue CAGR remains flattish, with a target of low single-digit growth [15] - Projected cumulative free cash flow of at least $600 million from 2026 to 2028, with plans to reduce debt by $450 million to $500 million during this period [15][49] - **Challenges**: - Decline in conventional syringe business in the US, projected to drop from $90 million in 2019 to around $35 million by 2025 [18] - Impact of pharmacy closures affecting inventory purchases and revenue [38] Growth Opportunities - **GLP-1 Market**: - Identified as the single biggest growth opportunity, with expectations for multi-dose pen injectors to replace single-use auto injectors [30][31] - Anticipated market opportunity of at least $100 million by 2033, with potential revenue contributions starting as early as 2026 [32][33] - **New Product Revenue Streams**: - Entering distribution agreements for products like blood glucose monitors and insulin pumps to diversify offerings [35] Operational Insights - **Manufacturing and Supply Chain**: - Transitioning to a new ERP system and establishing independent distribution networks post-spin from Becton Dickinson [8][9] - Current gross margins around 63%, with expectations for slight declines due to tariffs and increased R&D expenses [40][41] - **Debt Management**: - Current net leverage at 3.7 times, with a goal to reduce it to around 2 times by 2028 [48][49] Market Dynamics - **Geographic Growth**: - Emerging markets expected to grow at mid-single digits, while US business projected to see low single-digit declines [26][27] - **Impact of Formulary Changes**: - Generally viewed as beneficial if they make insulin more affordable for patients [25] Conclusion - **Investor Sentiment**: - Positive reception post-Analyst Day, with a focus on cautious and achievable financial projections [54][55] - **Future Outlook**: - The company aims to leverage its free cash flow capabilities to enhance its product portfolio and maintain stable growth despite market challenges [10][55]

Summary of the Conference Call Company Overview - **Company Name**: Inbecta - **Background**: Inbecta was spun out from Becton Dickinson's diabetes business on April 1, 2022, and has been a public company for over three years. The company generates approximately $1 billion in revenue and operates in around 140 countries with three main product categories: pen needles, safety products, and syringes [3][4]. Financial Performance and Growth Drivers - **Revenue Composition**: About 85% of Inbecta's revenue comes from pen needles and safety products, which have been growing at a rate of 2% to 2.5% over the past few years [4]. - **Financial Goals**: The company set a revenue CAGR target from 2022 to 2024 that was expected to be flat, with an adjusted EBITDA margin of around 30%. Inbecta exceeded both metrics during this period despite facing significant inflationary impacts [5][6]. - **Future Projections**: The core injection business is projected to experience a 1% to 2% CAGR decline over the long-range planning (LRP) period, primarily due to pressures in the US syringe business and a transition to other technologies [7][9]. Market Dynamics - **Syringe Business Challenges**: The US syringe business is under pressure, with expectations that revenue from this segment could decline significantly by 2028 [10]. - **Emerging Markets Growth**: Emerging markets, which represent about 20% of the business, are expected to grow at mid-single digits, while developed markets may see slight declines [12]. New Revenue Streams and Product Development - **New Product Opportunities**: Inbecta is focusing on leveraging its manufacturing capabilities and distribution agreements to introduce new products, including blood glucose monitors (BGMs), insulin pumps, and ultrasound products [15][17][27]. - **GLP-1 Market Potential**: The company is exploring partnerships with generic pharmaceutical companies for GLP-1 products, which could represent a $100 million annual market opportunity by 2033 [20][21]. Financial Strategy and Cash Flow - **Free Cash Flow Generation**: Inbecta anticipates generating approximately $600 million in cumulative free cash flow over the LRP period, with plans to pay down at least $110 million in debt in 2025 [35][36]. - **Debt Management**: The company aims to reduce its net leverage to around three times by the end of 2025, with potential for further reductions by 2028 [39][40]. Margin and Cost Considerations - **Operating Margin Decline**: The adjusted operating margin is expected to decline by approximately 125 basis points due to incremental tariffs and increased R&D expenses related to sourcing cannulas from multiple suppliers [28][29][31]. - **Tariff Impact**: Incremental tariffs are estimated to impact the business by $9 million to $10 million annually, but most products are largely exempt from tariffs due to medical necessity [43]. Key Takeaways - **Underappreciated Aspects**: The free cash flow capabilities of Inbecta have been masked by the complexities of separation from Becton Dickinson. The company is poised for growth through new product introductions and strategic partnerships [45][46].

Summary of Embecta (EMBC) 2025 Investor Day Company Overview - **Company**: Embecta (EMBC) - **Event**: 2025 Investor Day held on May 22, 2025 - **Background**: Embecta is the world's leading producer of pen needles and insulin syringes, having spun off from BD in 2022, with a focus on diabetes care products [8][9][10] Industry Insights - **Diabetes Prevalence**: Approximately 589 million adults aged 20-79 are living with diabetes, projected to rise to 853 million by 2050. The global prevalence rate is expected to increase from 10% in 2021 to 13% by 2050 [27][28] - **Emerging Markets**: The majority of new diabetes cases are expected to occur in emerging markets, with significant growth in insulin therapy adoption [29][30] Key Financial Metrics - **Revenue Composition**: Over 80% of Embecta's revenue comes from seven key markets, with the US accounting for 54% of total revenue. The company holds significant market shares in pen needles (50%), safety pen needles (60%), and insulin syringes (40%) [15][11][12] - **Production Capacity**: Embecta produces over 8 billion units annually across three highly automated plants, with room for expansion [13][12] Strategic Priorities 1. **Strengthening Core Business**: Focus on seamless brand transition and maintaining leadership in insulin injection devices [23] 2. **Expanding Product Portfolio**: Introduction of market-appropriate products leveraging manufacturing expertise [24] 3. **Increasing Financial Flexibility**: Plans to pay down approximately $110 million in debt during 2025 and enhance financial agility [25] Market Dynamics - **Product Demand**: Pen needles and safety pen needles account for approximately 84% of total revenue, with a stable outlook despite a decline in syringe usage due to a shift towards insulin pens [17][18] - **Commercial Strategy**: A comprehensive approach in the US market, focusing on retail pharmacies, mail, long-term care, and government customers [54][55] International Strategy - **Global Presence**: Embecta operates in key international markets, including LATAM, EMEA, and Asia, with a strong infrastructure to support local needs [85][86] - **Market Engagement**: Strong relationships with healthcare providers and direct engagement with patients to reinforce education and adherence [88][90] Product Differentiation - **Pen Needles**: Unique features include contoured needle bases and ultra-thin wall technology, enhancing user experience and confidence in insulin delivery [42][44] - **Safety Products**: Safety pen needles and syringes designed to reduce the risk of needle stick injuries, with a strong reputation for quality and reliability [48][49] Future Outlook - **Growth Opportunities**: Anticipated growth in emerging markets, particularly in China, where a significant number of people remain undiagnosed [94][95] - **Long-term Vision**: Transitioning from a focused insulin delivery company to a diversified medical supplies company by 2028 and beyond [22][21] Conclusion - **Sustainable Success**: Embecta is well-positioned for future growth through strategic initiatives, strong market presence, and a commitment to improving diabetes care globally [25][49]

Analyst & Investor Day May 22, 2025 New York, New York 1 Welcome to Analyst & Investor Day Pravesh Khandelwal Vice President, Investor Relations 2 2 Forward-looking statements Safe Harbor Statement Regarding Forward-Looking Statements This presentation contains express or implied "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements concern our current expectations regarding our future results ...

Core Insights - Embecta Corp. is hosting its inaugural Analyst and Investor Day to present its phased approach for value creation and long-range financial plan [1][2] - The company aims to transition into a broader medical supplies company while maintaining its leadership in insulin injection [2][3] Strategic Priorities - Embecta's core insulin injection business provides a stable revenue base with attractive margins, and the company is focusing on three strategic priorities for long-term success [3] - The company reaffirmed its fiscal year 2025 financial guidance, with reported revenues expected between $1,073 million and $1,090 million, reflecting a revenue growth decline of (4.4)% to (2.9)% [4][3] Financial Guidance - The adjusted gross margin is projected to be between 62.75% and 63.75%, with an adjusted operating margin of 29.75% to 30.75% [4] - Adjusted earnings per diluted share are expected to be between $2.70 and $2.90, with an adjusted EBITDA margin of 36.25% to 37.25% [4] Long Range Financial Plan - The long-range financial plan for fiscal years 2025 through 2028 includes strengthening the core business, expanding the product portfolio, and increasing financial flexibility through cost savings and debt reduction [5][6] - The company aims to maintain a flattish constant currency revenue CAGR, achieve an adjusted operating margin of approximately 28% to 30%, generate about $600 million in cumulative free cash flow, and repay between $450 million and $500 million of debt [6] Event Details - The Analyst and Investor Day is taking place live in New York City and via webcast, providing an opportunity for stakeholders to engage with the company's strategic vision [8]

Core Viewpoint - Embecta reported a decline in revenue for Q2 2025, primarily due to the termination of its insulin patch pump project and a strategic shift towards the rapidly growing GLP-1 market [1][6][10]. Financial Performance - Q2 2025 revenue was $259 million (approximately 1.87 billion RMB), a year-over-year decrease of 9.8%, with a constant currency decline of 7.7% [2][3]. - Net income for the quarter was $23.5 million, down 18.7% year-over-year, attributed to reduced revenue and increased restructuring costs [2]. - Revenue breakdown showed a significant decline in pen needles by 13.7% to $188.3 million, while syringes decreased by 4.0% to $28.8 million [3][4]. - Safety devices saw a slight increase of 2.7% to $34.2 million, and contract manufacturing revenue surged by 69.2% to $4.4 million [4]. Insulin Patch Pump Project Termination - The insulin patch pump project, aimed at developing systems for type 2 diabetes, was terminated in November 2024 due to competitive pressures and the rise of GLP-1 drugs [7][9]. - The termination is expected to incur restructuring costs between $35 million to $45 million, including cash and non-cash asset impairments [9]. - This decision is projected to save the company $60 million to $65 million annually, allowing a focus on core business and growth opportunities [9]. Strategic Shift to GLP-1 Market - The GLP-1 receptor agonist market is anticipated to reach $109 billion by 2030, prompting Embecta to explore opportunities in this area [10]. - The company began developing GLP-1 drug delivery solutions in September 2023, launching a small packaging GLP-1 needle in Germany in December 2024 [10]. - Embecta aims to expand its market share through partnerships with generic drug companies, expecting continued growth in the GLP-1 sector [10]. Company Overview - Embecta specializes in innovative insulin delivery and disease management solutions for diabetes patients, having become an independent Nasdaq-listed company in 2022 [11]. - The company’s core products include pen needles, syringes, and safety injection devices, serving approximately 30 million diabetes patients globally [11].

Part I [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Embecta Corp. as of and for the periods ended March 31, 2025 [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For the three months ended March 31, 2025, revenues were $259.0 million, a decrease from $287.2 million in the prior year period, with net income at $23.5 million, down from $28.9 million Condensed Consolidated Statements of Income (in millions, except per share amounts) | | Three Months Ended March 31, | | Six Months Ended March 31, | | | :--- | :--- | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | **Revenues** | $259.0 | $287.2 | $520.9 | $564.5 | | **Gross Profit** | $164.1 | $185.4 | $321.2 | $371.3 | | **Operating Income** | $62.9 | $39.2 | $91.6 | $84.7 | | **Net Income** | $23.5 | $28.9 | $23.5 | $49.0 | | **Diluted EPS** | $0.40 | $0.50 | $0.40 | $0.85 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) For the three months ended March 31, 2025, comprehensive income was $34.9 million, including a $11.4 million positive foreign currency translation adjustment, while the six-month period saw comprehensive income of $8.0 million, significantly lower than the prior year Condensed Consolidated Statements of Comprehensive Income (in millions) | | Three Months Ended March 31, | | Six Months Ended March 31, | | | :--- | :--- | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | **Net Income** | $23.5 | $28.9 | $23.5 | $49.0 | | **Foreign currency translation adjustments** | $11.4 | $(2.4) | $(15.5) | $9.2 | | **Comprehensive Income** | $34.9 | $26.5 | $8.0 | $58.2 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets decreased to $1,120.2 million from $1,285.3 million, with total liabilities at $1,856.4 million and a total equity deficit of $736.2 million Balance Sheet Highlights (in millions) | | **March 31, 2025** | **September 30, 2024** | | :--- | :--- | :--- | | **Total Current Assets** | $643.4 | $761.0 | | **Total Assets** | $1,120.2 | $1,285.3 | | **Total Current Liabilities** | $259.3 | $374.0 | | **Long-Term Debt** | $1,509.1 | $1,565.3 | | **Total Equity** | $(736.2) | $(738.3) | [Condensed Consolidated Statements of Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) The company's total equity deficit slightly improved to $736.2 million at March 31, 2025, driven by net income offset by dividends and accumulated other comprehensive loss Changes in Total Equity (Six Months Ended March 31, 2025, in millions) | Description | Amount | | :--- | :--- | | **Balance at October 1, 2024** | $(738.3) | | Net Income | $23.5 | | Other comprehensive (loss), net of taxes | $(15.5) | | Stock-based compensation plans | $16.2 | | Dividends and dividend equivalents declared | $(17.5) | | Issuance of shares related to stock-based compensation | $(4.6) | | **Balance at March 31, 2025** | $(736.2) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended March 31, 2025, net cash provided by operating activities was $26.5 million, while net cash used for financing activities was $82.5 million, resulting in a net decrease in cash of $61.9 million Summary of Cash Flows (Six Months Ended March 31, in millions) | | **2025** | **2024** | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $26.5 | $11.2 | | **Net cash used for investing activities** | $(1.6) | $(6.1) | | **Net cash used for financing activities** | $(82.5) | $(25.3) | | **Net Change in Cash** | $(61.9) | $(20.0) | | **Closing Cash and equivalents and restricted cash** | $212.3 | $306.5 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the discontinuation of the patch pump program, new restructuring plans, revenue disaggregation, and the company's $1.5 billion debt - The company initiated two restructuring plans: the 'Patch Pump Restructuring Plan' to discontinue its patch pump program with estimated costs of **$30.0-$40.0 million**, and a '2025 Restructuring Plan' to streamline the organization with estimated costs of **$4.0-$5.0 million**[44](index=44&type=chunk)[45](index=45&type=chunk) - A non-cash asset impairment charge of **$10.4 million** was recorded in the first half of fiscal 2025 to write down property and equipment due to the discontinuation of the patch pump program[89](index=89&type=chunk)[92](index=92&type=chunk) Revenues by Geography and Product Line (Six Months Ended March 31, in millions) | Category | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | **By Geography** | | | | | United States | $276.9 | $296.2 | (6.5%) | | International | $244.0 | $268.3 | (9.1%) | | **By Product Line** | | | | | Pen Needles | $379.4 | $428.0 | (11.4%) | | Syringes | $57.2 | $60.8 | (5.9%) | | Safety | $68.4 | $64.1 | +6.7% | - As of March 31, 2025, the company had total principal debt of **$1,541.5 million**, consisting of a Term Loan, 5.00% Notes, and 6.75% Notes, and was in compliance with all debt covenants[76](index=76&type=chunk)[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 7.7% revenue decrease for the six months ended March 31, 2025, driven by lower volumes and unfavorable foreign currency translation, while operating income increased due to reduced operating expenses - The company faces significant pricing pressure from competitors, commoditization of its traditional injection devices, and a shift in diabetes treatment towards new drug therapies (e.g., GLP-1s) that delay or reduce insulin use[102](index=102&type=chunk)[103](index=103&type=chunk)[105](index=105&type=chunk) - In November 2024, the company discontinued its patch pump R&D program to refocus on its core business, optimize free cash flow, and pay down debt, initiating a new restructuring plan in Q2 2025 to streamline the organization[109](index=109&type=chunk)[110](index=110&type=chunk) Results of Operations Summary (in millions) | | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | % Change | | :--- | :--- | :--- | :--- | | **Revenues** | $520.9 | $564.5 | (7.7)% | | **Gross Profit** | $321.2 | $371.3 | (13.5)% | | **Operating Income** | $91.6 | $84.7 | 8.1% | | **Net Income** | $23.5 | $49.0 | (52.0)% | - For the six months ended March 31, 2025, the company made a discretionary principal payment of **$55.0 million** on its Term Loan, part of a total **$59.8 million** in debt payments[133](index=133&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from foreign currency exchange rates and interest rates, with foreign currency risk managed through forward exchange contracts and interest rate risk primarily related to its variable-rate Term Loan - The company uses foreign currency forward exchange contracts to manage currency exposures from transactions denominated in currencies other than an entity's functional currency[152](index=152&type=chunk) - The primary interest rate risk is from the Term Loan, which has a variable rate based on SOFR, where a **100 basis point** change in interest rates would affect annualized interest expense by approximately **$8.5 million** based on the outstanding balance at March 31, 2025[154](index=154&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting related to a new ERP system implementation - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2025, due to a material weakness in internal control over financial reporting[156](index=156&type=chunk) - The material weakness is related to the ongoing, phased implementation of a new ERP system across the company's global operations, which is expected to be fully completed in the third quarter of fiscal 2025[157](index=157&type=chunk) - A remediation plan is in progress, including enhancing control design, executing robust training, and implementing enhanced oversight, but the material weakness has not yet been fully remediated[158](index=158&type=chunk)[159](index=159&type=chunk) Part II. Other Information [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) This section introduces a new material risk factor regarding trade actions, highlighting that new or increased tariffs and 'buy local' initiatives could adversely impact the availability and cost of raw materials and products - A new risk factor was added concerning trade actions, warning that tariffs, retaliatory tariffs, and 'buy local' initiatives could negatively affect the business by increasing product costs, reducing margins, and potentially decreasing product competitiveness[163](index=163&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications of the Chief Executive Officer and Chief Financial Officer, and iXBRL data files List of Exhibits | Exhibit | Description | | :--- | :--- | | 31.1 | Certification of Chief Executive Officer, pursuant to SEC Rule 13a–14(a) | | 31.2 | Certification of Chief Financial Officer, pursuant to SEC Rule 13a–14(a) | | 32.1 | Certification of Chief Executive Officer, pursuant to Rule 13a–14(b) and Section 1350 | | 32.2 | Certification of Chief Financial Officer, pursuant to Rule 13a–14(b) and Section 1350 | | 101 | iXBRL formatted financial statements and notes | | 104 | Cover Page Interactive Data File (Inline XBRL) |

Financial Data and Key Metrics Changes - The company reported second quarter revenue of $259 million, exceeding expectations of $250 million to $255 million, with half of the overachievement attributed to constant currency performance and the other half due to less adverse foreign exchange impacts than anticipated [1][5] - Year-over-year revenue declined by 9.8% on an as-reported basis and 7.7% on an adjusted constant currency basis [9] - GAAP gross profit for the second quarter was $164.1 million with a margin of 63.4%, compared to $185.4 million and 64.6% in the prior year [13] - Adjusted net income increased to $40.7 million, or $0.70 per diluted share, compared to $38.9 million and $0.67 in the prior year [16] Business Line Data and Key Metrics Changes - Pen needle revenue declined approximately 12.1%, while syringe revenue grew by 1.7%, safety products grew by 4.2%, and contact manufacturing grew by 73% [10][11] - The decline in pen needle revenue was primarily due to timing issues related to price increases and unfavorable prior year comparisons [11] Market Data and Key Metrics Changes - U.S. revenue for the quarter totaled $135.2 million, reflecting a year-over-year decline of 8.4% on an adjusted constant currency basis [9] - International revenue totaled $123.8 million, equating to a 7% decline on an adjusted constant currency basis compared to the prior year [10] Company Strategy and Development Direction - The company is advancing efforts to co-package pen needles with potential generic GLP-1 drugs, aiming to expand into a fast-growing market [3] - A restructuring plan has been initiated to streamline operations, with expected pretax charges of $4 million to $5 million and anticipated cost savings of $7 million to $8 million in the second half of fiscal 2025 [4][5] Management Comments on Operating Environment and Future Outlook - Management adjusted the full-year 2025 constant currency revenue outlook due to lower projected U.S. volumes linked to customer inventory reductions [6] - Despite headwinds, the company raised guidance for adjusted operating and EBITDA margins due to disciplined expense management [6] Other Important Information - The company received certification as a great place to work for 2025 in eight countries, reflecting a strong workplace culture [2] - The brand transition plan is underway in the U.S. and Canada, with expectations for global completion within the next couple of years [7][8] Q&A Session Summary Question: Can you provide insights into growth and demand dynamics across pen and syringes? - Management explained that ERP implementations and price increase timing affected year-over-year comparisons, but they expect stability in the pen needle market moving forward [29][35] Question: How should the market interpret the guidance cut? - Management indicated that despite the guidance cut, they expect the second half of the year to show improvement and momentum [40][43] Question: What is the impact of tariffs on margins? - Management confirmed a $3 million impact from tariffs in the second half of the year, with an estimated annualized impact of $8 million to $9 million for 2026 [48][49] Question: What is the focus of the new efficiency program? - The restructuring program aims to streamline operations, primarily in SG&A, with expected savings of $7 million to $8 million in the second half of the year [71][73]