Embecta Corp. Q4 FY2025 earnings call

• Fiscal year 2025 milestones: Ended batch pump program, executed restructuring for profitability, completed ERP and operationalized distribution network and shared services in Latin America and India, substantially completed brand transition in North America (95% of US and Canadian revenue converted), advanced GLP-1 strategy, generated $182 million free cash flow, paid down $184 million debt.
• In fiscal 2025, they achieved exceeding adjusted gross margin, operating margin, and EBITDA margin ranges, with adjusted diluted earnings per share at the top end of guidance.
• Commenced next phase of brand transition globally, with transition activities in international markets starting and expected to be significantly complete by end of 2026.

During 2025, Embecta generated $264 million in revenue, a 7.7% year-over-year decline on an as-reported basis or 10.4% decline on an adjusted constant currency basis. In the fourth quarter, US revenue was $142 million, down 15.2% on an adjusted constant currency basis, driven by factors like port strike impact and milestone payments. International Q4 revenue was $122 million, up 2.8% reported but down 4% adjusted constant currency due to China headwinds. Product family-wise, pen needle adjusted constant currency revenue declined ~13.9% in Q4, syringes down ~4.5%, safety products up ~3.7%, contract manufacturing up ~8.5%. For the full year, adjusted revenue was $1.08 billion, down 3.9% adjusted constant currency. US revenue was $579.1 million, down 4.6%, international $501.3 million, down 3.1%. Pen needle revenue down ~7.1%, syringes up 1.7%, safety products up 6.3%, contract manufacturing up ~53.9%.

• Adjusted constant currency revenue for fiscal 2026 is anticipated to be flat to down 2%. As-reported revenue range is -0.9% to +1.1%, resulting in $1.071 billion to $1.093 billion.
• Adjusted operating margin guidance range is 29-30%, down ~180 basis points at midpoint from 2025 due to increased cannula costs and R&D investment.
• Adjusted diluted earnings per share range is $2.80-$3, based on ~60 million weighted average diluted shares. Assumes repaying ~$150 million debt, net interest ~$93 million, and tax rate ~23%.

• Geopolitical tensions in China impacting consumer willingness to buy non-Chinese products.
• Reliance on sole cannula supplier from BD, which poses risk to gross margin due to increased costs.
• Potential impact of tariffs on margins.
• Changes in tax rate affecting profitability.

Q: Marie Yoko Thibault asked about GLP-1 partners and China.

A: Devdatt Kurdikar said they are in discussions with 30+ GLP-1 entrants, some have placed orders and shipped product, and China Q4 2025 performed as expected with steps taken to stabilize, expecting less headwind in 2026. Jacob P. Elguicze added on guidance related to GLP-1 revenue contribution.

Q: Michael K. Polark asked about cannula costs and US price unfavorable.

A: Devdatt Kurdikar said they rely on sole cannula supplier BD until 2032 but team is working on alternate suppliers, and Jacob P. Elguicze explained cannula costs contributed to gross margin decline and R&D investment for alternate suppliers impacts 2026 margins.

Q: Anthony Charles Petrone asked about GLP-1 contracts and capital deployment.

A: Devdatt Kurdikar talked about GLP-1 contracting phase, commercial contracts to come once approved, and mentioned openness to tuck-in M&A as leverage decreases.

Q: Gracia Leydon Mahoney asked about IP sale and pharmacy volumes.

A: Devdatt Kurdikar said they sold IP related to patch pump for $10 million, and Jacob P. Elguicze noted it's a Q1 2026 event. Devdatt also discussed pharmacy closures impact and incorporation into 2026 guidance.