Embecta (NasdaqGS:EMBC) Q1 2026 Earnings call February 05, 2026 08:00 AM ET Speaker2Welcome, ladies and gentlemen, to the Embecta Corp.'s fiscal first quarter 2026 earnings conference call. At this time, all participants have been placed in a listen-only mode. Please note that this conference call is being recorded, and a replay will be available on the company's website following the call. I would now like to hand the conference call over to your host today, Mr. Pravesh Khandelwal, Vice President of Invest ...

Earnings Conference Call Fiscal Q1 2026 February 5, 2026 1 Forward-looking statements Safe Harbor Statement Regarding Forward-Looking Statements This presentation contains express or implied "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements concern our current expectations regarding our future results from operations, performance, financial condition, goals, strategies, plans and achievemen ...

Key Takeaways BD completed a joint feasibility study proving polystyrene Petri dishes are a recyclable feedstock.The Pilot used Envetec's GENERATIONS technology to disinfect waste into polymer flakes.The effort supports circular economy goals despite no expected near-term revenue impact.Becton, Dickinson and Company (BDX) , popularly known as BD, recently announced the successful completion of a joint feasibility study evaluating the recycling of polystyrene Petri dishes into high-quality manufacturing feed ...

Core Insights - Medline Inc. is one of the largest providers of medical-surgical products and supply chain solutions, having closed its upsized IPO in December 2025, raising over $7 billion [1][2] Company Overview - Medline's product portfolio includes surgical kits, wheelchairs, crutches, hospital beds, fluid delivery sets, syringes, and pressure monitoring lines [1] - The company commands a market capitalization of approximately $32 billion [2] Analyst Ratings and Forecasts - Bank of America Securities initiated coverage with a Buy rating and a price forecast of $50, indicating a 23% potential upside [2] - BTIG also initiated coverage with a Buy rating and a price target of $50, viewing Medline as the "gold standard" for logistics and supply chain services [3] - RBC Capital Markets initiated with an Outperform rating and a price forecast of $47 [4] - Piper Sandler initiated with an Overweight rating and a price target of $50, highlighting Medline's Prime Vendor strategy as crucial for sustained growth [6] - Stifel initiated with a Buy rating and a price forecast of $46 [6] - TD Cowen initiated with a Buy rating and a price target of $46 [7] Growth Projections - Analysts expect Medline to achieve sustainable high-single-digit organic growth driven by market share gains and strong demand in the medical-surgical sector [3][5] - Revenue growth for 2025 is projected at 11% year over year, outpacing many competitors in a $375 billion total addressable market [4] Strategic Positioning - Medline's unique vertically integrated business model positions it well to leverage macroeconomic tailwinds and pursue M&A or international market expansion with approximately $1 billion in available capital after debt repayment [5] - The company has a consistent history of growth, with a 58-year track record of annual growth, and is recognized as the largest pure-play publicly traded MedSurg product and distribution company [7] Market Dynamics - Analysts believe Medline can continue to gain market share and see margin expansion through the conversion to branded products and strategic acquisitions [8] - The company's combined portfolio breadth and low product costs have allowed it to capture significant market share from competitors [8] Stock Performance - Medline shares were reported to be up 3.44% at $41.91 at the time of publication [9]

Core Insights - Shanghai Kohope Medical Devices Co., Ltd. is investing $2.5 million in facility expansion to meet increasing demand for syringes and medical needles in the U.S. and Canada [1][2] - The expansion will result in a 20% increase in production capacity, enabling the company to serve customers in over 50 countries more effectively [2][6] - The new manufacturing lines will increase monthly output to 25 million units and improve delivery times to U.S. healthcare facilities [4][10] Strategic Expansion Details - The expansion includes the installation of advanced automated production equipment with real-time quality control systems [10] - The new lines will focus on high-demand products such as 1ml, 3ml, and 5ml syringes, as well as 21-gauge to 25-gauge medical needles [10] - The new distribution center in Newark, New Jersey, will reduce delivery times from 3-4 weeks to 3-5 business days and provide same-day emergency fulfillment capabilities [4][6] Market Response and Future Growth - The expansion follows a 35% year-over-year increase in North American orders during 2024, driven by demand from various healthcare facilities [16] - The company has secured contracts with three major U.S. healthcare group purchasing organizations (GPOs) effective early 2025 [17] - The global distribution network spans over 50 countries, ensuring consistent supply and fostering long-term relationships with healthcare institutions [17] Commitment to Innovation - The company is advancing research and development initiatives, including a new line of safety-engineered syringes with retractable needles scheduled for market introduction in late 2025 [19] - Shanghai Kohope Medical Devices emphasizes adapting product offerings and capabilities to meet evolving healthcare needs [20] Comprehensive Product Portfolio - The company offers a wide range of syringes and medical needles, accommodating diverse dosage requirements and medical practices [14] - Each product undergoes meticulous quality inspection to ensure compliance with regulatory requirements across different markets [15]

Core Points - The U.S. has agreed to remove Section 232 tariffs on pharmaceutical goods from the U.K. as part of a new agreement [1] - The deal includes U.K.-based pharmaceuticals, pharmaceutical ingredients, and medical technology, with no future targeting of U.K. pricing practices during Trump's term [2] - The tariff exemption is contingent upon the U.K. reversing declining National Health Service expenditures on medicines and increasing the net price paid for new medicines by 25% [3] - This announcement is part of the U.S.-U.K. Economic Prosperity Deal framework, which aims to address tariffs and market access, with the potential for the U.K. to reduce tariffs on U.S. goods from 5.1% to 1.8% [4] - Trump has been focusing on pharmaceutical imports as part of a sector-specific tariff strategy, with a Section 232 investigation initiated in April [5] - Plans for a 100% sector-specific tariff on branded or patented pharmaceutical products were announced in September, alongside a probe into healthcare-related products [6]

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]

Financial Data and Key Metrics Changes - For fiscal year 2025, the company generated adjusted revenues of approximately $1.08 billion, reflecting a decline of 3.9% on an adjusted cost and currency basis [13] - The fourth quarter revenue was $264 million, 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 net income for fiscal 2025 was $95.4 million, compared to $78.3 million in the prior year, while adjusted net income was $173.9 million, up from $143.1 million [21][22] Business Line Data and Key Metrics Changes - Pen needle revenue declined approximately 7.1% year-over-year, totaling $784.1 million, primarily due to advanced distributor ordering in the prior year and pricing headwinds [14] - Syringe product revenues grew by 1.7% year-over-year, driven by improved pricing, while safety products grew 6.3% due to a combination of improved pricing and volume increases [15] - Contract manufacturing revenue grew approximately 53.9% compared to the prior year [15] Market Data and Key Metrics Changes - U.S. revenue for the fourth quarter totaled $142 million, reflecting a year-over-year decline of 15.2% on an adjusted cost and currency basis [11] - International revenue for the fourth quarter was $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 and pricing headwinds in China [12] - The decline in international revenue was largely attributed 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] - The company is advancing its GLP-1 strategy, collaborating with over 30 pharmaceutical partners to co-package pen needles with generic GLP-1 therapies, anticipating a $100 million annual revenue opportunity by 2033 [6][8] - The company aims to maintain leadership in core product categories while expanding its portfolio through new product development programs [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's direction despite a complex geopolitical and trade backdrop, focusing on maintaining leadership in core categories and delivering strong profitability and cash flow [58][59] - The company anticipates flat to down 2% revenue growth on an adjusted constant currency basis for fiscal year 2026, with expectations of modest declines in core injection and contract manufacturing revenue [25][26] - Management highlighted the importance of stabilizing the situation in China and remains optimistic about long-term growth in that market [39] Other Important Information - The company generated approximately $182 million in free cash flow during fiscal year 2025 and repaid approximately $184 million of debt, ending the year with a net leverage level of approximately 2.9 times [23] - The company sold certain intellectual property rights and long-lived assets associated with the discontinued patch pump program for $10 million, which will not impact adjusted results for fiscal year 2026 [54] Q&A Session Summary Question: Details on GLP-1 partnerships - The company is in discussions with over 30 potential GLP-1 entrants, with several already providing orders and submitting regulatory submissions [33][34] Question: Consumer willingness to buy non-Chinese products in China - The company has taken steps to stabilize the situation in China and introduced a more price-competitive pen needle [38] Question: Increased cannula costs and sourcing alternative suppliers - The company is working on identifying alternate cannula suppliers to mitigate cost increases and has made significant progress [41][43] Question: Milestone payments to a large U.S. pharmacy customer - Milestone payments are related to contract terms that include rebates and marketing spend, which can lead to year-over-year price fluctuations [44] Question: Capital deployment and M&A opportunities - The company remains focused on paying down debt but is open to organic and inorganic investments if value-creative opportunities arise [52]

Financial Performance - Q4 FY2025 - Reported revenue was $264 million, a decrease of 7.7% compared to the prior year period[16] - Adjusted revenue was $263.3 million, a decrease of 10.4% on an adjusted constant currency basis compared to the prior year period[16] - Adjusted EBITDA was $89.9 million with a margin of 34.1%, compared to $73 million and 25.2% in the prior year period[16] Financial Performance - FY2025 - Reported revenue was $1,080.4 million, down 3.8% compared to the prior year period[17] - Adjusted revenue was $1,079.7 million, down 3.9% on an adjusted constant currency basis compared to the prior year period[17] - Adjusted EBITDA was $415.3 million with a margin of 38.5%, compared to $353.4 million and 31.4% in the prior year[17] FY2026 Financial Guidance - The company projects reported revenue between $1,071 million and $1,093 million, representing a growth rate between -0.9% and 1.1%[18] - Adjusted constant currency revenue growth is expected to be between -2.0% and 0.0%[18] - Adjusted operating margin is projected to be between 29.0% and 30.0%[18]

Core Insights - The company reported a decrease in revenue for the fourth quarter and the full fiscal year 2025, primarily due to advanced distributor ordering and ongoing business dynamics in China [2][10][11] - Despite the revenue decline, the company achieved higher profitability metrics, including increased GAAP operating margin and net income year over year [3][10] - The company completed the first phase of its strategic roadmap and initiated the second phase focused on growth, operational efficiency, and debt reduction [3][9] Fourth Quarter Fiscal Year 2025 Financial Highlights - Reported revenues were $264.0 million, down 7.7% from $286.1 million in the prior year [6][10] - U.S. revenues decreased by 15.2%, while international revenues increased by 2.8% on a reported basis [6][8] - Gross profit was $158.5 million with a margin of 60.0%, compared to $173.8 million and 60.7% in the prior year [6][19] - Net income was $26.4 million, with diluted earnings per share of $0.45, compared to $14.6 million and $0.25 in the prior year [6][19] Twelve Months Ended September 30 Fiscal Year 2025 Financial Highlights - Reported revenues totaled $1,080.4 million, down 3.8% from $1,123.1 million in the previous year [11][19] - U.S. revenues decreased by 4.6%, while international revenues decreased by 2.8% on a reported basis [11][19] - Gross profit was $676.8 million with a margin of 62.6%, compared to $735.2 million and 65.5% in the prior year [11][19] - Net income was $95.4 million, with diluted earnings per share of $1.62, compared to $78.3 million and $1.34 in the prior year [11][19] Strategic Initiatives and Future Outlook - The company aims to strengthen its core business and expand its product portfolio, particularly in the GLP-1 strategy [9][12] - Fiscal year 2026 guidance anticipates reported revenues between $1,071 million and $1,093 million, with an expected revenue growth of -0.9% to 1.1% [12][13] - The company plans to maintain a strong adjusted operating margin of 29.0% to 30.0% in fiscal year 2026 [12][13] Balance Sheet and Liquidity - As of September 30, 2025, the company had $228.6 million in cash and equivalents and $1.417 billion in debt principal outstanding [15][19] - The company repaid approximately $72.4 million of outstanding principal under its term loan B facility during the fourth quarter [9][15] - A quarterly cash dividend of $0.15 per share was declared, payable on December 18, 2025 [16]