Financial Performance - Q2 Fiscal Year 2025 - Revenue for Q2 Fiscal Year 2025 was $259 million, a decrease of 9.8% compared to $287.2 million in Q2 Fiscal Year 2024 [21, 23] - Adjusted constant currency revenue decreased by 7.7% compared to the prior year period [21, 23] - GAAP gross profit was $164.1 million with a margin of 63.4%, compared to $185.4 million and 64.6% in the prior year period [23] - Adjusted EBITDA was $97.1 million, representing 37.5% of revenue, compared to $90.8 million and 31.6% in the prior year period [23] - The company paid down approximately $27.4 million of outstanding principal under its term loan B facility during the second quarter [14] Financial Performance - Six Months Ended March 31, 2025 - Total revenue was $520.9 million, a decrease of 7.7% compared to $564.5 million for the six months ended March 31, 2024 [32] - Adjusted constant currency revenue decreased by 6.3% [32] Fiscal Year 2025 Guidance - Reported revenue is projected to be between $1.073 billion and $1.090 billion, representing a decrease of 4.4% to 2.9% [24] - Adjusted constant currency revenue growth is expected to be between -4.0% and -2.5% [24] - The company expects pre-tax cost savings of between $7 million and $8 million during the second half of fiscal year 2025 [13]

FOR IMMEDIATE RELEASE Embecta Corp. Reports Second Quarter Fiscal 2025 Financial Results PARSIPPANY, N.J., May 9, 2025 (GLOBE NEWSWIRE) – Embecta Corp. ("embecta" or the "Company") (Nasdaq: EMBC), a global diabetes care company, today reported financial results for the three and six month periods ended March 31, 2025. "This quarter's financial results were once again slightly ahead of our prior expectations, as our teams executed well, which included driving an acceleration in our free-cash flow generation, ...

Core Viewpoint - Embecta Corp. reported financial results for the three and six month periods ended March 31, 2025, showing a decline in revenues but improvements in profitability metrics and cash flow generation [1][2][3]. Financial Highlights - For the second quarter, revenues were $259.0 million, down 9.8% year-over-year; U.S. revenues decreased by 8.4% and international revenues decreased by 11.3% [7][11]. - Gross profit was $164.1 million with a margin of 63.4%, compared to $185.4 million and 64.6% in the prior year [7][33]. - Operating income increased to $62.9 million with a margin of 24.3%, up from $39.2 million and 13.6% in the prior year [7][33]. - Net income was $23.5 million, or $0.40 per diluted share, compared to $28.9 million and $0.50 in the prior year [7][33]. - Adjusted EBITDA was $97.1 million with a margin of 37.5%, compared to $90.8 million and 31.6% in the prior year [7][33]. Strategic Highlights - The company is focused on strengthening its core business and has advanced its brand transition program in the U.S. and Canada, expected to be substantially complete in the second half of fiscal year 2025 [6][10]. - Embecta has received several purchase orders from pharmaceutical companies to co-package pen needles with potential generic GLP-1 drugs [10]. - The company has initiated a restructuring plan to streamline operations and optimize resources, which includes the discontinuation of the insulin patch pump program [10][12]. Updated Financial Guidance - For fiscal year 2025, the company expects reported revenues between $1,073 million and $1,090 million, with a revenue growth decline of 4.4% to 2.9% [14][15]. - Adjusted constant currency revenue growth is now projected to be between -4.0% and -2.5% [14][15]. Balance Sheet and Liquidity - As of March 31, 2025, the company had approximately $212.3 million in cash and equivalents and $1.542 billion in debt principal outstanding [17][18]. - The company declared a quarterly cash dividend of $0.15 per share, payable on June 13, 2025 [18].

Core Insights - Embecta Corp. will hold an Analyst and Investor Day on May 22, 2025, in New York City, focusing on strategic and business overview [1][2] - The event will feature presentations from the CEO, CFO, and other leadership team members, discussing value creation opportunities and the company's financial profile [2] - The webcast will be available for registration, and materials will be accessible post-event on the company's Investor Relations website [3] Company Overview - Embecta is a global diabetes care company with a 100-year legacy in insulin delivery, aiming to empower individuals with diabetes through innovative solutions [4] - The company employs approximately 2,000 individuals worldwide, emphasizing partnerships and a commitment to improving the lives of people with diabetes [4]

Core Viewpoint - Embecta Corp. will host a conference call to discuss its fiscal second quarter 2025 financial results and provide an operational update on May 9, 2025 [1] Group 1: Conference Call Details - The conference call is scheduled for 8:00 a.m. Eastern Time (ET) [1] - Participants can access the live webcast through the company's website or via a teleconference link [2] - A replay of the call will be available starting at 11:00 a.m. ET on the same day and will be archived for one year [2] Group 2: Company Overview - Embecta is a global diabetes care company with a 100-year legacy in insulin delivery [3] - The company aims to empower people with diabetes through innovative solutions and partnerships, supported by approximately 2,000 employees worldwide [3]

Core Insights - Embecta Corp. has announced the FITTER Forward Expert Recommendations, a significant update to global best practices for insulin injection technique and education, aimed at improving clinical outcomes for diabetes patients worldwide [1][2][3] Group 1: Publication and Initiative - The FITTER Forward initiative is a collaboration of 16 diabetes specialists from 13 countries, emphasizing the need for improved training and standardization in insulin delivery [1][2] - The publication titled "Advance Insulin Injection Technique and Education with FITTER Forward Expert Recommendations" is featured in the April edition of Mayo Clinic Proceedings [3] Group 2: Importance of Injection Technique - Proper injection technique, device handling, and insulin management are crucial for long-term glycemic control, often overlooked in discussions about insulin treatments [2] - The new recommendations provide healthcare professionals with evidence-based strategies to ensure correct and safe insulin delivery [2][3] Group 3: Advancements and Training - The update reflects advancements in device technology, research, and real-world patient data since the original FITTER guidelines were developed in 2016 [2] - Key components of the recommendations include new insights on injection device technology, standardized injection techniques, structured training programs for healthcare providers, and patient-centered tools [7]

Core Insights - Embecta's end market growth is influenced by new technologies that are capturing market share in insulin delivery, alongside the rising use of GLP-1 drugs which are reducing the frequency of Embecta's product usage [1] Company Analysis - Embecta is facing competition from emerging technologies in the insulin delivery market, which may impact its market share [1] - The increased adoption of GLP-1 drugs is leading to a decline in the frequency of Embecta's product usage, indicating a shift in treatment preferences among patients [1]

Group 1 - Embecta Corp. will have its Chief Financial Officer, Jake Elguicze, present at the J.P. Morgan Global Leveraged Finance Conference on February 25, 2025 [1] - The conference will take place in Miami at 3:00 p.m. ET [1] Group 2 - Embecta is a global diabetes care company with nearly 100 years of experience in insulin delivery [2] - The company aims to empower people with diabetes through innovative solutions and partnerships [2] - Embecta employs approximately 2,000 individuals worldwide [2]

Financial Data and Key Metrics Changes - Embecta Corp. generated approximately $262 million in revenue for Q1 2025, reflecting a 5.6% decline year-over-year on a reported basis and a 4.8% decline on an adjusted constant currency basis [14][21][22] - GAAP gross profit for Q1 2025 was $157.1 million with a margin of 60%, compared to $185.9 million and 67% in the prior year [26] - Adjusted net income for Q1 2025 was $38.3 million, resulting in adjusted earnings per share of $0.65, compared to $35.3 million and $0.61 in the prior year [30] Business Line Data and Key Metrics Changes - Pen needle revenue declined approximately 8.5%, while syringe revenue declined approximately 4.2% [24] - Safety products grew approximately 11.3%, and contact manufacturing revenue grew approximately 153% [24] - The decline in pen needle revenue was attributed to additional revenue in Q4 2024 due to distributor inventory purchases in anticipation of a US port strike [24][51] Market Data and Key Metrics Changes - US revenue for Q1 totaled $141.7 million, reflecting a year-over-year decline of 4.6% on an adjusted constant currency basis [22] - International revenue totaled $120.2 million, equating to a 5.1% decline on an adjusted currency basis [23] - The year-over-year decline in international business was primarily due to distributor rebalancing and difficult comparisons from prior inventory purchases [23] Company Strategy and Development Direction - The company is focused on three key priorities: strengthening the core business, expanding the product portfolio, and increasing financial flexibility [10][12] - The brand transition program is on track, with efforts to co-package pen needles with potential generic GLP-1 drugs [15][18] - The restructuring plan related to the discontinuation of the insulin patch pump program is expected to be completed by the end of the first half of fiscal year 2025 [16] Management's Comments on Operating Environment and Future Outlook - Management noted that the first quarter slightly exceeded internal expectations, but revenue comparisons will be impacted by prior year order timing and ERP implementations [14][21] - The company expects to materially reduce outstanding debt over the next few years, enhancing financial agility [12][32] - Management updated fiscal 2025 guidance, reaffirming constant currency revenue guidance while raising adjusted operating and EBITDA margin guidance ranges [17][40] Other Important Information - The company plans to pay down approximately $110 million in debt during 2025 [12][32] - The updated financial guidance reflects unfavorable foreign exchange rates, with an expected headwind of about 2.2% versus the prior year [38] Q&A Session Summary Question: Can you walk through each of the three key product categories and their expected performance? - Management indicated that Q1 performance was slightly better than expected, with pen needles being the majority category affected by prior year inventory dynamics and ERP implementations [49][51] Question: What is the progress on the GLP-1 pen needle opportunity, particularly in Germany? - Management stated that progress in Germany is ongoing, with expectations for pen needles to be used for out-of-pocket prescriptions, but quantification of revenue is not yet available [62][64] Question: What leverage ratio would allow for more opportunistic M&A? - Management emphasized a focus on debt repayment and financial flexibility, with a net leverage target of around three times by the end of fiscal 2025 before considering M&A opportunities [71][74] Question: How should we think about long-term margin progressions? - Management indicated that long-term margin discussions will occur at the upcoming Analyst Day, with a focus on expanding the product portfolio and optimizing costs [76][82]

Financial Performance - Revenues decreased by $15.4 million, or 5.6%, to $261.9 million for the three months ended December 31, 2024, compared to $277.3 million for the same period in 2023[112] - Gross profit decreased by $28.8 million to $157.1 million, with gross profit as a percentage of revenue dropping to 60.0% from 67.0% in the prior year[112] - Operating income fell by $16.8 million to $28.7 million, representing a decrease of 36.9%[112] - Net income decreased by $20.1 million to $0.0 million, marking a 100% decline compared to the previous year[112] - Cost of products sold increased by $13.4 million, or 14.7%, to $104.8 million, with cost of products sold as a percentage of revenues rising to 40.0% from 33.0%[113] - Selling and administrative expenses decreased by $9.2 million, or 10.2%, to $81.1 million, primarily due to lower costs associated with BD[114] - Research and development expenses increased slightly by $0.1 million, or 0.5%, to $20.3 million, driven by asset impairments related to the discontinued patch pump program[115] Debt and Cash Flow - As of December 31, 2024, total principal debt issued by the company was $1,568.9 million, with long-term debt amounting to $1,534.7 million after accounting for current debt obligations and debt issuance costs[123] - The company's total debt as of December 31, 2024, was $1,544.2 million, with short-term debt representing 0.6% of total debt and a weighted average cost of total debt at 6.7%[124] - Cash and equivalents decreased from $274.2 million on September 30, 2024, to $216.7 million on December 31, 2024, primarily due to cash used for financing activities totaling $45.2 million[133] - The company paid approximately $32.4 million on the Term Loan during the first quarter of fiscal year 2025, with $30.0 million being discretionary payments[125] - Net cash used for operating activities was $5.3 million, primarily due to changes in accounts payable and accrued expenses, which were affected by the timing of payments[133] - The company plans to explore options for retiring or repurchasing outstanding debt, depending on market conditions and liquidity requirements[126] Tax and Regulatory Issues - The effective tax rate increased to 100.0% for the three months ended December 31, 2024, compared to (40.6)% in the prior year, primarily due to the absence of tax benefits from deferred tax assets[121] Operational Challenges - The company continues to face pricing pressures and competition in the medical device industry, impacting operating margins[100] - The company is subject to various risks, including competitive factors, operating cost fluctuations, and potential impacts from geopolitical instability[141] - The company is exposed to foreign currency exchange risks that could adversely affect its financial condition and cash flows[145] Internal Controls and Compliance - As of December 31, 2024, the company's disclosure controls and procedures were deemed ineffective due to a material weakness in internal control over financial reporting[150] - The company has initiated a remediation plan to address the identified material weakness, which will continue through fiscal year 2025[152] - No changes in internal control over financial reporting occurred during the three months ended December 31, 2024, that materially affected internal controls[153] - The company is enhancing control documentation and design to improve the accuracy of data used in financial reporting[154] Technology and Infrastructure - The company expects to incur material costs associated with operating and maintaining its information technology infrastructure over the next several years[138] - The implementation of a new ERP system is ongoing, with phases completed in North America, EMEA, Asia, and Greater China during fiscal years 2023 and 2024; Latin America implementation was completed in Q1 FY2025[151] Interest Rates - The interest rate on the company's Term Loan is set at 300 basis points over SOFR, with a 0.50% SOFR floor; a 100 basis points change in interest rates would impact interest expense by $8.7 million annually[148] Lease Obligations - Total lease payments, including finance and operating leases, are projected to be $71.6 million as of December 31, 2024[128] Credit Ratings - The company’s credit ratings are B1 from Moody's and B+ from Standard & Poor's as of mid-2024[131]