Embecta Corp. (NASDAQ:EMBC) Q2 2024 Results Conference Call May 9, 2024 8:00 AM ET Company Participants Pravesh Khandelwal - Vice President & Head of Investor Relations Dev Kurdikar - President, Chief Executive Officer & Director Jake Elguicze - Senior Vice President & Chief Financial Officer Conference Call Participants Marie Thibault - BTIG Kallum Titchmarsh - Morgan Stanley Ryan Schiller - Wolfe Research, LLC Operator Welcome, ladies and gentlemen, to the Fiscal Second Quarter 2024 Embecta Earnings Confe ...

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited statements show quarterly revenue growth but decreased gross and operating profit, with net income boosted by a significant tax benefit [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Financial Performance Summary | Metric | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | Six Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $287.2M | $277.1M | $564.5M | $552.8M | | **Gross Profit** | $185.4M | $189.8M | $371.3M | $378.6M | | **Operating Income** | $39.2M | $55.6M | $84.7M | $144.4M | | **Net Income** | $28.9M | $14.0M | $49.0M | $49.2M | | **Diluted EPS** | $0.50 | $0.24 | $0.85 | $0.85 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Financial Position Summary | Balance Sheet Item | March 31, 2024 | September 30, 2023 | | :--- | :--- | :--- | | **Cash and equivalents** | $299.8M | $326.3M | | **Total Current Assets** | $710.0M | $749.1M | | **Total Assets** | $1,199.6M | $1,214.4M | | **Long-Term Debt** | $1,591.8M | $1,593.9M | | **Total Liabilities** | $1,969.2M (derived) | $2,036.1M (derived) | | **Total Equity** | $(769.6)M | $(821.7)M | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary | Cash Flow Activity (Six Months Ended March 31) | 2024 | 2023 | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | $11.2M | $47.4M | | **Net Cash Used for Investing Activities** | $(6.1)M | $(10.5)M | | **Net Cash Used for Financing Activities** | $(25.3)M | $(26.8)M | | **Net Change in Cash** | $(20.0)M | $15.5M | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - As of March 31, 2024, all factoring agreements with former parent company BD have **expired and terminated** due to the implementation of new ERP systems and business continuity processes[42](index=42&type=chunk) - Separation and stand-up costs related to the spin-off from BD amounted to **$32.6 million for the quarter** and **$59.0 million for the six months** ended March 31, 2024, primarily for implementing the new ERP system[46](index=46&type=chunk) Revenue by Geography (in millions) | Revenue by Geography (in millions) | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | Six Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | **United States** | $147.6 | $146.4 | $296.2 | $295.7 | | **International** | $139.6 | $130.7 | $268.3 | $257.1 | | **Total** | $287.2 | $277.1 | $564.5 | $552.8 | - The effective tax rate for the quarter was **(191.9)%** compared to 42.9% in the prior year, primarily due to a discrete **tax benefit of $18.8 million**[76](index=76&type=chunk) - The company has significant customer concentration risk, with **three customers accounting for 42.0% of total gross revenues** and **four customers representing 63.6% of total gross trade receivables**[83](index=83&type=chunk)[84](index=84&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses revenue growth drivers, margin pressures from inflation and operational issues, and the impact of separation costs on operating income [Results of Operations](index=23&type=section&id=Results%20of%20Operations) - For the three months ended March 31, 2024, **revenue increased 3.6% to $287.2 million**, driven by volume increases but partially offset by negative foreign currency translation and unfavorable pricing[109](index=109&type=chunk) - Cost of products sold as a percentage of revenue **increased to 34.2% from 31.5%** year-over-year, driven by inflation, manufacturing variances from a plant shutdown, and unfavorable foreign exchange[112](index=112&type=chunk) - Selling and administrative expenses **rose 8.3% for the quarter**, primarily due to increased compensation, benefits, and outbound freight costs[113](index=113&type=chunk) - Research and development expenses **decreased by 16.7% for the quarter**, mainly due to a prior-year upfront payment for a collaboration agreement[114](index=114&type=chunk) - Other operating expenses increased to **$35.5 million for the quarter**, driven by costs related to the Separation from BD and the implementation of a new ERP system[115](index=115&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Debt Summary (as of March 31, 2024) | Debt Summary (as of March 31, 2024) | Amount (in millions) | | :--- | :--- | | Term Loan due March 2029 | $931.0 | | 5.00% Notes due February 2030 | $500.0 | | 6.75% Notes due February 2030 | $200.0 | | **Total principal debt issued** | **$1,631.0** | | Less: current obligations & issuance costs | $(39.2) | | **Long-term debt (net)** | **$1,591.8** | - Cash and equivalents **decreased by $20.0 million** during the six months ended March 31, 2024, while net cash from operating activities saw a **significant decrease to $11.2 million** from $47.4 million in the prior year[126](index=126&type=chunk)[127](index=127&type=chunk) - The increase in trade receivables is a direct result of the company now being responsible for collections following its ERP implementation and the termination of factoring agreements with BD[128](index=128&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency and interest rate fluctuations, managed through derivatives and exposed via its Term Loan - The company's primary interest rate risk is associated with its Term Loan B facility; a **100 basis point change** in interest rates would affect annualized interest expense by **$9.3 million**[143](index=143&type=chunk) - The company uses foreign currency forward exchange contracts to manage exposure from transactions denominated in currencies other than an entity's functional currency[141](index=141&type=chunk) [Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management affirmed the effectiveness of disclosure controls while noting the ongoing multi-phase ERP system implementation post-separation - Management concluded that as of March 31, 2024, the company's **disclosure controls and procedures were effective**[144](index=144&type=chunk) - The company is implementing a new ERP system in phases and still relies on some of BD's systems and controls for certain international markets during the transition[145](index=145&type=chunk)[146](index=146&type=chunk) [Part II. Other Information](index=31&type=section&id=Part%20II.%20Other%20Information) [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors have occurred since the last annual and quarterly reports - **No material changes** have been made to the risk factors previously described in the 2023 Form 10-K and the Q1 2024 Form 10-Q[150](index=150&type=chunk) [Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including agreement amendments with BD, officer certifications, and iXBRL data - Exhibits filed include amendments to agreements with BD, CEO/CFO certifications, and iXBRL data files[151](index=151&type=chunk) [Signatures](index=32&type=section&id=Signatures)

FOR IMMEDIATE RELEASE Embecta Corp. Reports Second Quarter Fiscal 2024 Financial Results PARSIPPANY, N.J., May 9, 2024 (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, 2024. "Our performance in the second quarter and fiscal first half of 2024 underscores the resiliency of our base business, as well as strong operational execution by our global team. Since our spin ...

PARSIPPANY, N.J., May 01, 2024 (GLOBE NEWSWIRE) -- Embecta Corp. ("embecta") (NASDAQ:EMBC), a global diabetes care company with a 100-year legacy in insulin delivery, today announced that management will participate in the following investor events: 2024 BofA Securities Healthcare Conference Management will host a fireside session on Thursday, May 16, 2024, at 10:00 a.m. Pacific Time (PT) at the Encore Hotel in Las Vegas. Audio webcasts of the presentations will be accessible under the "News & Events" secti ...

PARSIPPANY, N.J., April 23, 2024 (GLOBE NEWSWIRE) -- Embecta Corp. (“embecta”) (Nasdaq: EMBC), a global diabetes care company with a 100-year legacy in insulin delivery, will host a conference call to discuss its fiscal second quarter 2024 financial results, provide an operational update, and host a question and answer session, at 8:00 a.m. Eastern Time (ET) on Thursday, May 9, 2024. Those who would like to participate may access the live webcast here, or access the teleconference here. The live webcast can ...

PARSIPPANY, N.J., March 06, 2024 (GLOBE NEWSWIRE) -- Embecta Corp. ("embecta") (NASDAQ:EMBC), a global diabetes care company with a 100-year legacy in insulin delivery, today announced its sponsorship of a symposium at the Advanced Technologies & Treatments for Diabetes (ATTD) international conference. This event is scheduled for Wednesday, March 6, at 10:40 a.m. Eastern Standard Time / 14:40 Central European Time. Additionally, six embecta-sponsored abstracts focusing on injection and insulin pump therapie ...

Here are three stocks with buy rank and strong value characteristics for investors to consider today, February 12:Xerox Holdings Corporation (XRX) : This workplace technology company carries a Zacks Rank #1, and has witnessed the Zacks Consensus Estimate for its current year earnings increasing 16.4% over the last 60 days.Xerox Holdings Corporation has a price-to-earnings ratio (P/E) of 8.99 compared with 12.40 for the industry. The company possesses a Value Score of A.Embecta Corp. (EMBC) : This medical de ...

Shares of Embecta (EMBC.V -14.58%) were tanking on Friday, falling 13% lower as of 10:54 a.m. ET. The decline came after the diabetes care company reported its fiscal year 2024 first-quarter results.Despite the big sell-off, Embecta reported positive Q1 results. The company generated revenue in the quarter of $277.3 million, up 0.6% year over year and better than the average analysts' estimate of $264.9 million.Embecta also posted earnings of $20.1 million, or $0.35 per share, based on generally accepted ac ...

Financial Data and Key Metrics Changes - In Q1, the company generated revenue of $277.3 million, representing an increase of 0.6% on an as-reported basis and a decline of 0.3% on a constant currency basis [4] - GAAP gross profit for Q1 was $185.9 million with a margin of 67%, compared to $188.8 million and 68.5% in the prior year [6] - GAAP net income for Q1 was $20.1 million, down from $35.2 million in the prior year, with diluted earnings per share of $0.35 compared to $0.61 [7] - Adjusted EBITDA for Q1 totaled approximately $90.4 million with a margin of 32.6%, down from $110.2 million and 40% in the prior year [7] Business Line Data and Key Metrics Changes - The core injection business grew by 0.5% on a constant currency basis when normalizing for non-diabetes products [4] - The insulin patch pump program has seen significant advancements, including the submission of a 510(k) application for the open loop version to the FDA [3] Market Data and Key Metrics Changes - Revenue in the US totaled $148.6 million, representing a year-over-year decline of approximately 0.5%, while international revenue was $128.7 million, equating to flat year-over-year constant currency growth [59] Company Strategy and Development Direction - The company is focused on three strategic priorities: strengthening the base business in insulin injection devices, thoughtful separation from the former parent company, and investing in growth, particularly in the insulin patch pump program [42] - The company plans to implement its ERP system and shared services capabilities in additional markets, aiming for over 85% of revenue base on its own ERP platform by the end of Q2 [56] Management's Comments on Operating Environment and Future Outlook - Management noted that while they have generally avoided major disruptions during the transition away from TSAs with BD, there is a possibility of temporary sales disruptions in specific countries [2] - The company reaffirmed its full-year 2024 financial guidance, expecting revenue to be flat to down 2% compared to 2023, with a focus on mitigating risks associated with the ERP transition [8] Other Important Information - The company has completed the legal entity transfer for its Suzhou, China manufacturing facility and anticipates resuming domestic production for the Chinese market in Q2 [57] - The company is increasing its adjusted earnings per share guidance from a range of $1.90 - $2.10 to $1.95 - $2.15 due to improvements in foreign exchange rates [47] Q&A Session Summary Question: Feedback from FDA on patch pumps and timing of approval - Management indicated that the review process is underway and they are in communication with the FDA, but they cannot comment on timing [11][54] Question: Constant currency growth expectations for the US versus internationally - Management expects growth outside the US to exceed that of the US, with international markets growing in the mid-single-digit range [23] Question: Plans for commercialization of the open-loop patch pump - The company plans a limited market release of the open-loop pump, dependent on FDA approval timing [17] Question: Clarification on ERP transition and customer ordering patterns - Management explained that customers often place orders in advance during ERP transitions to avoid stock-outs, leading to some lumpiness in orders [24][26] Question: Production environment for patch pumps and CapEx plans - The company is working with a contract manufacturer for production and has established a pilot production line, with total CapEx expected to be between $50 million to $60 million for 2024 [31][69]

Embecta Corp. (EMBC) came out with quarterly earnings of $0.61 per share, beating the Zacks Consensus Estimate of $0.45 per share. This compares to earnings of $0.96 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 35.56%. A quarter ago, it was expected that this company would post earnings of $0.42 per share when it actually produced earnings of $0.59, delivering a surprise of 40.48%.Over the last four quarters, the company ha ...