Financial Data and Key Metrics Changes - For Q4 2025, Embecta generated $264 million in revenue, reflecting a 7.7% decline year-over-year on an as-reported basis or a 10.4% decline on an adjusted cost and currency basis [10] - GAAP gross profit for Q4 2025 totaled $158.5 million with a margin of 60%, compared to $173.8 million and 60.7% in the prior year [15] - Adjusted net income for Q4 2025 was $29.4 million, or $0.50 per diluted share, compared to $25.9 million and $0.45 in the prior year [17] Business Line Data and Key Metrics Changes - In Q4 2025, pen needle revenue declined approximately 13.9%, while syringe revenue declined by approximately 4.5% [12] - Safety products grew approximately 3.7%, and contract manufacturing revenue grew approximately 8.5% during the same period [12] - For the full year, pen needle revenue declined approximately 7.1%, while syringe revenues grew by 1.7% and safety products grew by 6.3% [14] Market Data and Key Metrics Changes - U.S. revenue for Q4 totaled $142 million, reflecting a year-over-year decline of 15.2% on an adjusted cost and currency basis [11] - International revenue for Q4 totaled $122 million, representing an increase of 2.8% on a reported basis but a decline of 4% on an adjusted cost and currency basis, primarily due to lower volumes in China [12] - The decline in international revenue was primarily due to lower revenue contribution from China, driven by heightened competitive intensity and local brand preferences [14] Company Strategy and Development Direction - The company ended its patch pump program and executed a restructuring plan aimed at enhancing profitability and free cash flow [5] - Embecta is collaborating with over 30 pharmaceutical partners to co-package pen needles with generic GLP-1 therapies, anticipating launches in Canada, Brazil, and India during calendar year 2026 [7] - The company aims to maintain its leadership position in core product categories while expanding into new market segments through product development programs [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the progress made during fiscal 2025 and outlined a strategic direction for sustainable growth [10] - The company anticipates a flat to down 2% revenue change for fiscal 2026, with expectations of modest declines in core injection and contract manufacturing revenue [22] - Management acknowledged the challenges posed by geopolitical tensions, particularly in China, but remains optimistic about long-term market potential [40] Other Important Information - Embecta generated approximately $182 million in free cash flow during fiscal 2025 and repaid approximately $184 million of debt [21] - The company expects to generate between $180 million and $200 million in free cash flow during fiscal 2026 [29] - A transaction to sell certain intellectual property rights associated with the discontinued patch pump program for $10 million occurred after year-end [21] Q&A Session Summary Question: Details on GLP-1 partnerships - Management is in discussions with over 30 potential GLP-1 entrants, with several already providing orders for development purposes [33][34] Question: Consumer willingness to buy non-Chinese products in China - Management noted that Q4 2025 performance in China met expectations, and steps have been taken to stabilize the situation [39][40] Question: Increased cannula costs and sourcing alternative suppliers - The company is working on identifying alternate cannula suppliers to mitigate cost increases and reduce reliance on a sole source [45][46] Question: Clarification on milestone payments to a U.S. pharmacy customer - Management explained that milestone payments are related to volume levels and marketing spend, impacting pricing dynamics [49] Question: Structure of contracts with generic GLP-1 providers - Management discussed the initial phases of contracting and the importance of reliability in supply for generic manufacturers [56][58] Question: Capital deployment and M&A opportunities - Management remains focused on debt repayment but is open to organic and inorganic investments as leverage decreases [64][65] Question: Sale of intellectual property associated with the patch pump - The sale of certain IP for $10 million will increase cash but will not impact adjusted results for fiscal 2026 [70]

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 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]

Financial Data and Key Metrics Changes - Second quarter revenue totaled $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 foreign exchange headwinds than anticipated [1][5] - 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 [12] - Adjusted net income for the second quarter was $40.7 million, up from $38.9 million in the prior year, with adjusted earnings per share increasing to $0.70 from $0.67 [15] Business Line Data and Key Metrics Changes - In the U.S., revenue for the quarter was $135.2 million, reflecting an 8.4% decline on an adjusted constant currency basis [9] - International revenue totaled $123.8 million, equating to a 7% decline on an adjusted constant currency basis [10] - Thin needle revenue declined approximately 12.1%, while syringe revenue grew by approximately 1.7% and safety products grew approximately 4.2% [11] Market Data and Key Metrics Changes - The decline in U.S. revenue was primarily due to timing issues related to price increases and customer purchasing patterns [9][10] - The international business faced similar challenges with prior year inventory builds impacting comparisons [10] - The company noted that the anticipated reductions in customer inventory levels tied to store closures at a specific U.S. retail pharmacy customer would impact future volumes [21] 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 was initiated to streamline operations, with expected pretax charges of $4 million to $5 million and estimated cost savings of $7 million to $8 million during the second half of fiscal 2025 [4][5] - The brand transition plan is underway, with a phased execution expected to complete globally within the next couple of years [7][8] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of lower projected U.S. volumes and customer inventory reductions on guidance, but maintained that these issues are transitory [21] - The company expects to see flat to slightly positive overall constant currency revenue growth in the second half of the year, despite a 150 basis point reduction in full-year guidance [42] - Management remains focused on maintaining profitability and reducing debt, with a goal of reducing gross debt by $110 million during fiscal 2025 [17][72] Other Important Information - The company has received several purchase orders from generic manufacturers for bulk pen needles, marking a significant strategic milestone [52] - The company is committed to mitigating potential impacts from tariffs, with an estimated $3 million impact on full-year margins due to U.S.-China tariffs [48][49] - The inaugural Analyst and Investor Day is scheduled for May 22, where the company will share more about its portfolio and long-term financial objectives [26] Q&A Session Summary Question: Can you provide insights into growth and demand dynamics across pen and syringes? - Management explained that the decline in U.S. revenue was influenced by ERP implementations and price increase timing, leading to unfavorable year-over-year comparisons [30][34] Question: Are the store closures isolated issues? - Management indicated that while aware of planned store closures, they believe the impact on their products will be manageable as patients may switch to other pharmacies [36][38] Question: What is the expected impact of tariffs on margins? - Management confirmed a $3 million impact on full-year margins due to tariffs, with potential annualized impacts estimated for future fiscal years [48][49] Question: Can you elaborate on the new efficiency program? - The restructuring program focuses on SG&A cost reductions, with expected savings of $7 million to $8 million in the second half of the year, potentially annualizing to around $15 million [75]