Embecta (EMBC) - 2025 Q3 - Quarterly Results

Executive Summary This section provides an overview of Embecta's strong Q3 FY2025 performance, strategic initiatives, and updated financial outlook Third Quarter Performance Overview Embecta reported a strong third quarter for FY 2025, with solid commercial execution contributing to an increase in revenues. The company also tightened and raised its FY 2025 outlook for key financial metrics - Q3 was a strong quarter for embecta, reflecting solid commercial execution, aided in part by the timing of customer orders[2] - Given the year-to-date performance and outlook, Embecta is tightening and raising its FY 2025 outlook for key financial metrics[2] Strategic Initiatives and Outlook The company successfully completed a multi-year separation program by implementing its ERP system and operationalizing distribution centers and shared services in India. Embecta remains focused on value creation drivers, including its long-term goal of transforming into a diversified medical supplies company - Implemented ERP system and operationalized own distribution centers and shared services in India, concluding a multi-year separation program[3] - Remaining focused on executing value creation drivers, including the long-term goal of transforming into a diversified medical supplies company[3] Financial Highlights This section details Embecta's financial performance for Q3 and the nine months ended June 30, 2025, including key income statement and balance sheet metrics Third Quarter Fiscal Year 2025 Financial Highlights Embecta reported strong Q3 FY2025 financial results, with significant increases across key metrics including revenue, operating income, net income, and adjusted EBITDA compared to the prior year period. The company also announced a dividend of $0.15 per share | Metric | Q3 FY2025 | Q3 FY2024 | Reported Change | Adjusted Constant Currency Change | | :-------------------------------- | :---------- | :---------- | :-------------- | :-------------------------------- | | Revenues | $295.5M | $272.5M | +8.4% | +8.0% | | U.S. Revenues | +11.6% | N/A | +11.6% | +11.6% | | International Revenues | +5.0% | N/A | +5.0% | +4.2% | | Gross Profit | $197.1M | $190.1M | +3.7% | N/A | | Adjusted Gross Profit | $198.6M | $190.3M | +4.4% | N/A | | Operating Income | $94.0M | $55.9M | +68.2% | N/A | | Adjusted Operating Income | $109.1M | $83.3M | +31.0% | N/A | | Net Income | $45.5M | $14.7M | +209.5% | N/A | | Diluted EPS | $0.78 | $0.25 | +212.0% | N/A | | Adjusted Net Income | $65.5M | $43.0M | +52.3% | N/A | | Adjusted Diluted EPS | $1.12 | $0.74 | +51.4% | N/A | | Adjusted EBITDA | $131.0M | $99.2M | +32.1% | N/A | - Announced a dividend of $0.15 per share[5] Nine Months Ended June 30, 2025 Financial Highlights For the nine months ended June 30, 2025, Embecta's revenues decreased slightly on a reported and adjusted constant currency basis. However, the company achieved notable improvements in operating income, net income, and adjusted EBITDA compared to the prior year period | Metric | 9M FY2025 | 9M FY2024 | Reported Change | Adjusted Constant Currency Change | | :-------------------------------- | :---------- | :---------- | :-------------- | :-------------------------------- | | Revenues | $816.4M | $837.0M | -2.5% | -1.7% | | U.S. Revenues | -0.6% | N/A | -0.6% | -0.6% | | International Revenues | -4.5% | N/A | -4.5% | -2.7% | | Gross Profit | $518.3M | $561.4M | -7.6% | N/A | | Adjusted Gross Profit | $527.8M | $562.4M | -6.1% | N/A | | Operating Income | $185.6M | $140.6M | +32.0% | N/A | | Adjusted Operating Income | $271.0M | $235.7M | +15.0% | N/A | | Net Income | $69.0M | $63.7M | +8.3% | N/A | | Diluted EPS | $1.18 | $1.10 | +7.3% | N/A | | Adjusted Net Income | $144.5M | $117.2M | +23.3% | N/A | | Adjusted Diluted EPS | $2.46 | $2.02 | +21.8% | N/A | | Adjusted EBITDA | $325.4M | $280.4M | +16.0% | N/A | Revenue Analysis This section analyzes Embecta's revenue performance by geographic region and product family for Q3 and the nine months ended June 30, 2025 Third Quarter Revenue Breakdown In Q3 FY2025, total revenues increased by $23.0 million (8.4%) to $295.5 million. This growth was primarily driven by favorable changes in volume, price, increased contract manufacturing revenues, and positive foreign currency translation. Pen needles remained the largest product family Q3 FY2025 Revenue by Geographic Region | Region | 2025 (Reported) | 2024 (Reported) | Reported Growth | Adjusted Constant Currency Growth | | :------------- | :-------------- | :-------------- | :-------------- | :-------------------------------- | | United States | $160.2M | $143.6M | 11.6% | 11.6% | | International | $135.3M | $128.9M | 5.0% | 4.2% | | Total | $295.5M | $272.5M | 8.4% | 8.0% | Q3 FY2025 Revenue by Product Family | Product Family | 2025 (Reported) | 2024 (Reported) | Reported Growth | Adjusted Constant Currency Growth | | :------------- | :-------------- | :-------------- | :-------------- | :-------------------------------- | | Pen Needles | $216.9M | $201.3M | 7.7% | 6.8% | | Syringes | $35.1M | $31.7M | 10.7% | 14.5% | | Safety | $34.8M | $32.4M | 7.4% | 6.5% | | Contract Manufacturing | $5.5M | $3.6M | 52.8% | 47.2% | - The increase in revenues was driven by $13.5 million of favorable changes in volume, $6.8 million of favorable changes in price, a $1.7 million increase in contract manufacturing revenues, and $1.0 million associated with the positive impact of foreign currency translation[10] Nine Months YTD Revenue Breakdown For the nine months ended June 30, 2025, revenues decreased by $20.6 million (2.5%) to $816.4 million. This decline was primarily due to unfavorable changes in volume and negative foreign currency translation, partially offset by favorable price changes and increased contract manufacturing revenues 9 Months YTD FY2025 Revenue by Geographic Region | Region | 2025 (Reported) | 2024 (Reported) | Reported Growth | Adjusted Constant Currency Growth | | :------------- | :-------------- | :-------------- | :-------------- | :-------------------------------- | | United States | $437.1M | $439.8M | (0.6)% | (0.6)% | | International | $379.3M | $397.2M | (4.5)% | (2.7)% | | Total | $816.4M | $837.0M | (2.5)% | (1.7)% | 9 Months YTD FY2025 Revenue by Product Family | Product Family | 2025 (Reported) | 2024 (Reported) | Reported Growth | Adjusted Constant Currency Growth | | :------------- | :-------------- | :-------------- | :-------------- | :-------------------------------- | | Pen Needles | $596.3M | $629.3M | (5.2)% | (4.8)% | | Syringes | $92.3M | $92.5M | (0.2)% | 4.1% | | Safety | $103.2M | $96.5M | 6.9% | 7.2% | | Contract Manufacturing | $14.7M | $8.1M | 81.5% | 80.3% | - The decrease in revenues was driven by $31.0 million of unfavorable changes in volume and $7.0 million associated with the negative impact of foreign currency translation, partially offset by $10.9 million of favorable changes in price and a $6.5 million increase in contract manufacturing revenues[11] Strategic Highlights This section outlines Embecta's key strategic initiatives to strengthen its core business, expand its product portfolio, and increase financial flexibility Strengthen Core Business Embecta completed its global ERP system transition and established shared service capabilities and distribution infrastructure in India. The company also significantly advanced its brand transition program in the U.S. and Canada, aiming for substantial completion by the end of FY 2025 - Completed the global transition to our ERP system, shared service capabilities, and distribution infrastructure in India[7] - Significantly advanced the brand transition program in the U.S. and Canada, expected to be substantially complete by the end of FY 2025[7] Expand Product Portfolio The company is expanding its product portfolio by signing multiple contracts and receiving purchase orders to co-package embecta pen needles with potential generic GLP-1 drugs. Progress is also being made on expanding the availability of appropriately sized GLP-1 retail packaging - Signed multiple contracts and received several purchase orders from pharmaceutical companies to co-package embecta pen needles with potential generic GLP-1 drugs[7] - Continued to make progress on expanding availability of appropriately sized GLP-1 retail packaging for use with weekly injection therapies[7] Increase Financial Flexibility Embecta substantially completed its restructuring plan, anticipating $7 million to $8 million in pre-tax cost savings in the second half of FY 2025. The company also reduced its debt by approximately $52.4 million in Q3, achieving its FY 2025 debt reduction target of $112 million year-to-date - Substantially completed the restructuring plan, expecting $7 million to $8 million in pre-tax cost savings during the second half of FY 2025[7] - Reduced debt by approximately $52.4 million in Q3 FY2025, bringing total year-to-date debt reduction to approximately $112 million, achieving the FY2025 target[7] Fiscal Year 2025 Updated Financial Guidance This section presents Embecta's updated financial guidance for FY2025, including revised outlooks for revenues, margins, and earnings per share Updated FY2025 Outlook Embecta has tightened and raised its FY 2025 financial guidance, providing updated ranges for reported revenues, adjusted constant currency revenue growth, adjusted gross margin, adjusted operating margin, adjusted earnings per diluted share, and adjusted EBITDA margin Fiscal Year 2025 Updated Financial Guidance | Metric | Current Guidance | Previous Guidance | | :-------------------------------- | :--------------- | :---------------- | | Reported Revenues | $1,078 - $1,085M | $1,073 - $1,090M | | Reported Revenue Growth (%) | (4.0)% - (3.4)% | (4.4)% - (2.9)% | | Impact of F/X (%) | (0.8)% | (0.8)% | | Impact of Italian Payback Measure (%) | 0.4% | 0.4% | | Adjusted Constant Currency Revenue Growth (%) | (3.6)% - (3.0)% | (4.0)% - (2.5)% | | Adjusted Gross Margin (%) | 63.25% - 63.50% | 62.75% - 63.75% | | Adjusted Operating Margin (%) | 30.75% - 31.00% | 29.75% - 30.75% | | Adjusted Earnings per Diluted Share | $2.90 - $2.95 | $2.70 - $2.90 | | Adjusted EBITDA Margin (%) | 37.25% - 37.50% | 36.25% - 37.25% | - The company is unable to present a quantitative reconciliation of its expected adjusted non-GAAP metrics due to the unpredictable impact and timing of one-time items[15] Balance Sheet, Liquidity and Other Updates This section provides an overview of Embecta's financial position, liquidity, debt, and dividend declaration as of June 30, 2025 Current Financial Position and Dividend As of June 30, 2025, Embecta maintained a healthy liquidity position with $233.6 million in cash and equivalents and no draws on its $500 million Revolving Credit Facility, while managing $1.489 billion in debt principal outstanding. The Board of Directors declared a quarterly cash dividend of $0.15 per share Liquidity Snapshot (as of June 30, 2025) | Metric | Amount | | :-------------------------------- | :---------- | | Cash and equivalents and restricted cash | $233.6M | | Debt principal outstanding | $1.489B | | Revolving Credit Facility | $500M (no amount drawn) | - The Company's Board of Directors declared a quarterly cash dividend of $0.15 for each issued and outstanding share of common stock, payable on September 15, 2025[17] Condensed Consolidated Financial Statements This section presents Embecta's condensed consolidated statements of income, balance sheets, and cash flows for the reported periods Condensed Consolidated Statements of Income The condensed consolidated statements of income provide a detailed overview of Embecta's financial performance, showing revenues, cost of products sold, gross profit, operating expenses, operating income, and net income for the three and nine months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Income (Selected Data) | Metric | Q3 FY2025 | Q3 FY2024 | 9M FY2025 | 9M FY2024 | | :-------------------------- | :---------- | :---------- | :---------- | :---------- | | Revenues | $295.5M | $272.5M | $816.4M | $837.0M | | Cost of products sold | $98.4M | $82.4M | $298.1M | $275.6M | | Gross Profit | $197.1M | $190.1M | $518.3M | $561.4M | | Total Operating Expenses | $103.1M | $134.2M | $332.7M | $420.8M | | Operating Income | $94.0M | $55.9M | $185.6M | $140.6M | | Net Income | $45.5M | $14.7M | $69.0M | $63.7M | | Diluted EPS | $0.78 | $0.25 | $1.18 | $1.10 | Condensed Consolidated Balance Sheets The condensed consolidated balance sheets present Embecta's financial position as of June 30, 2025, and September 30, 2024, detailing assets, liabilities, and equity. Key changes include a decrease in total assets and long-term debt, and an improvement in total equity Condensed Consolidated Balance Sheets (Selected Data) | Metric | June 30, 2025 | Sept 30, 2024 | | :-------------------------------- | :-------------- | :-------------- | | Cash and equivalents | $230.6M | $267.5M | | Total Current Assets | $681.5M | $761.0M | | Total Assets | $1,157.3M | $1,285.3M | | Total Current Liabilities | $275.5M | $374.0M | | Long-Term Debt | $1,458.8M | $1,565.3M | | Total Equity | $(669.6)M | $(738.3)M | - Total assets decreased from $1,285.3 million as of September 30, 2024, to $1,157.3 million as of June 30, 2025[23] - Long-term debt decreased from $1,565.3 million to $1,458.8 million[23] Condensed Consolidated Statements of Cash Flows The condensed consolidated statements of cash flows illustrate the movement of cash from operating, investing, and financing activities for the nine months ended June 30, 2025 and 2024. Notably, net cash provided by operating activities significantly increased, while payments on long-term debt also saw a substantial rise Condensed Consolidated Statements of Cash Flows (Selected Data) | Activity | 9M FY2025 | 9M FY2024 | | :-------------------------------- | :---------- | :---------- | | Net cash provided by operating activities | $107.7M | $9.1M | | Net cash used for investing activities | $(2.0)M | $(15.8)M | | Net cash used for financing activities | $(145.1)M | $(36.8)M | | Net Change in Cash and equivalents and restricted cash | $(40.6)M | $(44.7)M | - Payments on long-term debt increased from $7.2 million in 9M FY2024 to $112.2 million in 9M FY2025[25] Non-GAAP Financial Measures and Reconciliations This section explains Embecta's non-GAAP financial measures and provides reconciliations to their most directly comparable GAAP financial measures About Non-GAAP Financial Measures Embecta supplements its GAAP financial reporting with several non-GAAP measures, including Adjusted Revenues, EBITDA, Adjusted EBITDA, Adjusted Gross Profit, Adjusted Operating Income, and Adjusted Net Income. These measures are intended to provide greater transparency and assist investors in analyzing the underlying operating performance, but are not substitutes for GAAP results - Embecta uses non-GAAP financial measures to provide greater transparency and assist investors in making comparisons to historical operating results and analyzing underlying performance[27] - These non-GAAP measures are not required by GAAP and should not be considered in isolation or as a substitute for the company's results as reported under GAAP[27] Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA This section provides a reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA for the three and nine months ended June 30, 2025 and 2024. Key adjustments include stock-based compensation, one-time stand-up costs, EU MDR, business optimization costs, and costs associated with the discontinued patch pump program Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA (Selected Data) | Metric | Q3 FY2025 | Q3 FY2024 | 9M FY2025 | 9M FY2024 | | :-------------------------------- | :---------- | :---------- | :---------- | :---------- | | GAAP Net Income | $45.5M | $14.7M | $69.0M | $63.7M | | EBITDA | $108.0M | $63.7M | $216.1M | $161.2M | | Adjusted EBITDA | $131.0M | $99.2M | $325.4M | $280.4M | | Adjusted EBITDA Margin | 44.3% | 36.4% | 39.9% | 33.5% | - Significant adjustments to EBITDA include one-time stand-up costs ($11.0M in Q3 FY25, $23.1M in Q3 FY24) and costs associated with the discontinued patch pump program ($2.3M in Q3 FY25, $45.4M in 9M FY25)[28] Reconciliation of GAAP to Adjusted Gross Profit, Operating Income, and Net Income Per Diluted Share This section details the reconciliations from GAAP to adjusted figures for gross profit, operating income, and net income per diluted share. Adjustments include amortization of intangible assets, one-time stand-up costs, EU MDR compliance costs, stock-based compensation, business optimization, and costs related to the discontinued patch pump program Reconciliation of GAAP to Adjusted Gross Profit (Selected Data) | Metric | Q3 FY2025 | Q3 FY2024 | 9M FY2025 | 9M FY2024 | | :-------------------------- | :---------- | :---------- | :---------- | :---------- | | GAAP Gross Profit | $197.1M | $190.1M | $518.3M | $561.4M | | Adjusted Gross Profit | $198.6M | $190.3M | $527.8M | $562.4M | | GAAP Gross Profit Margin | 66.7% | 69.8% | 63.5% | 67.1% | | Adjusted Gross Profit Margin | 67.2% | 69.8% | 64.6% | 67.2% | Reconciliation of GAAP to Adjusted Operating Income (Selected Data) | Metric | Q3 FY2025 | Q3 FY2024 | 9M FY2025 | 9M FY2024 | | :-------------------------- | :---------- | :---------- | :---------- | :---------- | | GAAP Operating Income | $94.0M | $55.9M | $185.6M | $140.6M | | Adjusted Operating Income | $109.1M | $83.3M | $271.0M | $235.7M | | GAAP Operating Income Margin | 31.8% | 20.5% | 22.7% | 16.8% | | Adjusted Operating Income Margin | 36.9% | 30.6% | 33.2% | 28.2% | Reconciliation of GAAP to Adjusted Net Income Per Diluted Share (Selected Data) | Metric | Q3 FY2025 | Q3 FY2024 | 9M FY2025 | 9M FY2024 | | :-------------------------------- | :---------- | :---------- | :---------- | :---------- | | GAAP Net Income per Diluted share | $0.78 | $0.25 | $1.18 | $1.10 | | Adjusted Net Income per Diluted share | $1.12 | $0.74 | $2.46 | $2.02 | Company Information This section provides information about Embecta, its mission, forward-looking statements, and contact details for stakeholders About Embecta Embecta is a global diabetes care company with a 100-year legacy in insulin delivery, currently transforming into a broad-based medical supplies company. It aims to improve lives through innovative solutions, partnerships, and the dedication of its approximately 2,000 employees worldwide - Embecta is a global company advancing its 100-year legacy in insulin delivery to become a broad-based medical supplies company[35] - The company helps improve lives through innovative solutions, partnerships, and the passion of approximately 2,000 employees globally[35] Safe Harbor Statement Regarding Forward-Looking Statements This section contains a safe harbor statement, indicating that the press release includes forward-looking statements about future results, performance, and strategic plans. These statements are subject to various known and unknown risks and uncertainties, and actual results may differ materially from expectations - This press release contains express or implied 'forward-looking statements' concerning current expectations regarding future results, performance, financial condition, goals, strategies, plans, achievements, and anticipated product clearances, approvals and launches[36] - These forward-looking statements are subject to various known and unknown risks, uncertainties, and other factors, and actual results may differ materially from expectations[36] Contacts Contact information for investor relations and media inquiries is provided for stakeholders seeking further information about Embecta Corp - Investors can contact Pravesh Khandelwal, VP, Head of Investor Relations at 551-264-6547[37] - Media inquiries can be directed to Christian Glazar, Sr. Director, Corporate Communications at 908-821-6922[37]