Embecta (US:EMBC)2025-11-25 14:00Financial 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]