Embecta (US:EMBC)2025-11-25 21:05Financial Performance - Revenues decreased by $42.7 million, or 3.8%, to $1,080.4 million for the year ended September 30, 2025, compared to $1,123.1 million for the year ended September 30, 2024[228]. - Gross profit decreased by $58.4 million to $676.8 million, with gross profit as a percentage of revenue at 62.6%, down from 65.5% in the prior year[230]. - Operating income increased by $75.3 million to $242.1 million from $166.8 million[230]. - Net income increased by $17.1 million to $95.4 million from $78.3 million[230]. Expenses - Research and development expenses decreased by $41.5 million, or 52.7%, to $37.3 million due to the discontinuation of the patch pump program[233]. - Selling and administrative expenses decreased by $33.1 million, or 9.1%, to $332.0 million, primarily driven by lower costs with BD and reduced compensation expenses[232]. - Cost of products sold increased by $15.7 million, or 4.0%, to $403.6 million, with cost of products sold as a percentage of revenues at 37.4% compared to 34.5% in the prior year[229]. - Other operating expenses decreased to $65.4 million from $124.5 million, with significant reductions in costs related to the separation and the patch pump program[234]. Debt and Interest - Interest expense, net decreased to $107.3 million from $112.3 million, primarily due to lower debt levels and interest rates[235]. - As of September 30, 2025, total principal debt issued amounted to $1,416.8 million, with long-term debt standing at $1,388.7 million after accounting for current debt obligations and debt issuance costs[244]. - The company has outstanding $200.0 million of senior secured notes with a 6.75% interest rate due in February 2030, and $500.0 million of 5.00% senior secured notes due in February 2030[242][244]. - The weighted average cost of total debt as of September 30, 2025, was 6.4%, with short-term debt representing 0.7% of total debt[245]. - The company paid an aggregate principal amount of approximately $184.6 million on the Term Loan during the year ended September 30, 2025[246]. - The company is in compliance with all financial covenants related to its credit agreements and senior secured notes as of September 30, 2025[245]. Cash Flow - Cash and equivalents and restricted cash decreased to $228.6 million as of September 30, 2025, from $274.2 million as of September 30, 2024, reflecting a $45.6 million decrease[252][253]. - Net cash provided by operating activities was $191.7 million, primarily driven by a net income of $95.4 million and non-cash adjustments totaling $120.0 million[253]. - The company entered into a trade receivables sale agreement, resulting in the sale of $63.2 million of trade receivables during fiscal year 2025[250][251]. Taxation - The income tax provision increased to $40.9 million for the year ended September 30, 2025, compared to $(34.1) million for the year ended September 30, 2024, primarily due to the absence of prior tax benefits and higher overall earnings in 2025[238]. - The company has established a reserve for uncertain tax positions unless they are more likely than not to be sustained upon examination[264]. - The company’s policy includes recognizing interest and penalties related to income taxes as part of income tax expense[264]. Risks and Challenges - The company is exposed to risks from changes in foreign currency exchange rates, which could adversely affect its financial condition and cash flows[269]. - As of September 30, 2025, a 100 basis points change in interest rates would impact interest expense on the Term Loan by $7.1 million annually[273]. - The company anticipates potential impacts from new tariffs instituted by the U.S. government on raw materials and products, which could increase operating costs[270]. - The company is subject to risks related to the inability to replace services currently provided by BD on similar terms, which could affect operations[266]. - The company faces competitive pressures from new drug therapies for diabetes treatment and new product introductions by competitors[266]. - The company is undergoing a brand transition, which includes regulatory challenges and potential customer confusion[270]. Strategic Initiatives - The company has entered into foreign currency forward exchange contracts to manage currency exposures, partially offsetting gains and losses[271]. - The company is evaluating strategic collaborative partnerships and acquisition opportunities to accelerate growth and access innovative technologies[270].