What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2024-02-09 · 173 added, 111 removed, 337 unchanged (46% of the section changed)

3 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2024 2023 2024 2023

Revenues $ 287.2 $ 277.1 $ 564.5 $ 552.8

11 unchanged sentences

Income tax provision (benefit)

( 19.0 ) 10.5 ( 24.8 ) 31.4

Net Income $ 28.9 $ 14.0 $ 49.0 $ 49.2

7 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2024 2023 2024 2023

Net Income $ 28.9 $ 14.0 $ 49.0 $ 49.2

Other Comprehensive Income, net of tax

Other Comprehensive Income (Loss), net of tax

Foreign currency translation adjustments ( 2.4 ) 2.7 9.2 28.7

Other Comprehensive Income

Total Other Comprehensive Income (Loss), net of tax

$ ( 2.4 ) $ 2.7 $ 9.2 $ 28.7

4 unchanged sentences

Embecta Corp.

December 31, 2023 September 30, 2023

March 31, 2024 September 30, 2023

Current Assets

Cash and cash equivalents $ 298.7 $ 326.5

Trade receivables, net (net of allowance for doubtful accounts of $ 1.2 million and $ 1.0 million as of December 31, 2023 and September 30, 2023, respectively)

Cash and equivalents

$ 299.8 $ 326.3

Restricted cash 6.7 0.2

Trade receivables, net (net of allowance for doubtful accounts of $ 1.6 million and $ 1.0 million as of March 31, 2024 and September 30, 2023, respectively)

Materials 37.4 32.1

26 unchanged sentences

Authorized - 250,000,000

Issued and outstanding - 57,573,497 as of December 31, 2023 and 57,333,353 as of September 30, 2023

Issued and outstanding - 57,661,433 as of March 31, 2024 and 57,333,353 as of September 30, 2023

Additional paid-in capital 39.7 27.9

8 unchanged sentences

Shares Par Value Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive (Loss) Income Total

Balance at October 1, 2022 57,055,327 $ 0.6 $ 10.0 $ ( 577.1 ) $ ( 324.9 ) $ ( 891.4 )

Net income attributable to Embecta Corp.

Balance at January 1, 2023 57,213,757 $ 0.6 $ 12.7 $ ( 550.5 ) $ ( 298.9 ) $ ( 836.1 )

Net income — — — 14.0 — 14.0

Other comprehensive income, net of taxes — — — — 2.7 2.7

Stock-based compensation plans — — 5.6 — — 5.6

Dividends declared ($ 0.15 per share)

— — — ( 8.6 ) — ( 8.6 )

Issuance of shares related to stock-based compensation plans 73,780 — ( 0.2 ) — — ( 0.2 )

Balance at March 31, 2023 57,287,537 $ 0.6 $ 18.1 $ ( 545.1 ) $ ( 296.2 ) $ ( 822.6 )

Balance at January 1, 2024 57,573,497 $ 0.6 $ 33.4 $ ( 530.0 ) $ ( 297.5 ) $ ( 793.5 )

Net income — — — 28.9 — 28.9

Other comprehensive loss, net of taxes — — — — ( 2.4 ) ( 2.4 )

Stock-based compensation plans — — 6.5 — — 6.5

Dividends declared ($ 0.15 per share)

Dividends and dividend equivalents declared ($ 0.15 per share)

— — 0.3 ( 8.9 ) — ( 8.6 )

Issuance of shares related to stock-based compensation plans 87,936 — ( 0.5 ) — — ( 0.5 )

Balance at December 31, 2022 57,213,757 $ 0.6 $ 12.7 $ ( 550.5 ) $ ( 298.9 ) $ ( 836.1 )

Balance at March 31, 2024 57,661,433 $ 0.6 $ 39.7 $ ( 510.0 ) $ ( 299.9 ) $ ( 769.6 )

See notes to the Unaudited Condensed Consolidated Financial Statements.

Dollar amounts are in millions except per share amounts or as otherwise specified.

Shares Par Value Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive (Loss) Income Total

Balance at October 1, 2022 57,055,327 $ 0.6 $ 10.0 $ ( 577.1 ) $ ( 324.9 ) $ ( 891.4 )

Net income attributable to Embecta Corp.

Net income — — — 49.2 — 49.2

Other comprehensive income, net of taxes — — — — 28.7 28.7

Stock-based compensation plans — — 11.1 — — 11.1

Dividends declared ($ 0.30 per share)

— — — ( 17.2 ) — ( 17.2 )

Issuance of shares related to stock-based compensation plans 232,210 — ( 3.0 ) — — ( 3.0 )

Balance at March 31, 2023 57,287,537 $ 0.6 $ 18.1 $ ( 545.1 ) $ ( 296.2 ) $ ( 822.6 )

Balance at October 1, 2023 57,333,353 $ 0.6 $ 27.9 $ ( 541.1 ) $ ( 309.1 ) $ ( 821.7 )

Net income — — — 49.0 — 49.0

Other comprehensive income, net of taxes — — — — 9.2 9.2

3 unchanged sentences

Issuance of shares related to stock-based compensation plans 328,080 — ( 2.7 ) — — ( 2.7 )

Balance at December 31, 2023 57,573,497 $ 0.6 $ 33.4 $ ( 530.0 ) $ ( 297.5 ) $ ( 793.5 )

Balance at March 31, 2024 57,661,433 $ 0.6 $ 39.7 $ ( 510.0 ) $ ( 299.9 ) $ ( 769.6 )

See notes to the Unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

Embecta Corp.

Three Months Ended

Six Months Ended

Operating Activities

14 unchanged sentences

Other assets and liabilities, net ( 24.1 ) ( 5.5 )

Net Cash (Used for) Provided by Operating Activities

Net Cash Provided by Operating Activities

$ 11.2 $ 47.4

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Net Cash Used for Financing Activities $ ( 25.3 ) $ ( 26.8 )

Effect of exchange rate changes on cash and cash equivalents 1.5 4.7

Net Change in Cash and cash equivalents $ ( 27.8 ) $ 54.3

Opening Cash and cash equivalents 326.5 330.9

Closing Cash and cash equivalents $ 298.7 $ 385.2

Effect of exchange rate changes on cash and equivalents and restricted cash

Net Change in Cash and equivalents and restricted cash

$ ( 20.0 ) $ 15.5

Opening Cash and equivalents and restricted cash

Closing Cash and equivalents and restricted cash

$ 306.5 $ 346.4

See notes to the Unaudited Condensed Consolidated Financial Statements.

19 unchanged sentences

Actual results could differ from these estimates.

Recently Adopted Accounting Standards

There were no new material accounting standards adopted in the second first quarter of 2024.

Recently Issued Accounting Standards Not Yet Adopted

1 unchanged sentence

Improvements to Reportable Segment Disclosures, which modifies the disclosure and presentation requirements of reportable segments.

This update is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 with early adoption permitted.

The Company is currently evaluating the impact that this guidance will have on the presentation of its condensed consolidated financial statements and accompanying notes.

This update is effective for the Company beginning with its fiscal year 2025 reporting and for interim reporting beginning with its fiscal year 2026.

As this accounting standard only impacts disclosures, it will not have a material impact on the Company’s Consolidated Financial Statements.

In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures.

This update is effective for annual periods beginning after December 15, 2024 with early adoption permitted.

The Company is currently evaluating the impact that this guidance will have on the presentation of its condensed consolidated financial statements and accompanying notes.

This update is effective for the Company beginning with its fiscal year 2026 reporting.

As this accounting standard only impacts disclosures, it will not have a material impact on the Company’s Consolidated Financial Statements.

Reclassification

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Pursuant to the Separation and Distribution Agreement, BD agreed to spin off its diabetes care business (the "Diabetes Care Business") into Embecta, a new, publicly traded company (the "Separation").

In connection with the Separation, the Company entered into the Separation and Distribution Agreement, which contains provisions that, among other things, relate to (i) assets, liabilities and contracts to be transferred, assumed and assigned to each of Embecta and BD (including certain deferred assets and liabilities) as part of the Separation, (ii) cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of Embecta's business with Embecta and financial responsibility for the obligations and liabilities of BD’s remaining businesses with BD, (iii) procedures with respect to claims subject to indemnification and related matters, (iv) the allocation among Embecta and BD of rights and obligations under existing insurance policies with respect to occurrences prior to completion of the Separation, as well as the right to proceeds and the obligation to incur certain deductibles under certain insurance policies, and (v) procedures

Dollar amounts are in millions except per share amounts or as otherwise specified.

governing Embecta’s and BD’s obligations and allocations of liabilities with respect to ongoing litigation matters that may implicate each of BD’s business and Embecta’s business.

Agreements that Embecta entered into with BD that govern aspects of Embecta's relationship with BD following the Separation include, but are not limited to the Transition Services Agreements ("TSA"), Trade Receivables Factoring Agreements ("Factoring Agreements"), Distribution Agreements, Cannula Supply Agreement, Tax Matters Agreement, Logistics Services Agreement, employee matters agreement, an intellectual property matters agreement, local support services agreements, certain other manufacturing arrangements and a process services agreement and lease agreement for a manufacturing facility located in Holdrege, Nebraska.

obligations under existing insurance policies with respect to occurrences prior to completion of the Separation, as well as the right to proceeds and the obligation to incur certain deductibles under certain insurance policies, and (v) procedures governing Embecta’s and BD’s obligations and allocations of liabilities with respect to ongoing litigation matters that may implicate each of BD’s business and Embecta’s business.

Agreements that Embecta entered into with BD that govern aspects of Embecta's relationship with BD following the Separation include, but are not limited to the Transition Services Agreements ("TSA"), Trade Receivables Factoring Agreements ("Factoring Agreements"), Distribution Agreements, Cannula Supply Agreement, Tax Matters Agreement, Logistics Services Agreement ("LSA"), employee matters agreement, an intellectual property matters agreement, local support services agreements, certain other manufacturing arrangements and a process services agreement and lease agreement for a manufacturing facility located in Holdrege, Nebraska.

For details on the rights and responsibilities of the parties under these agreements refer to Note 4 to the audited Consolidated Financial Statements in Embecta’s Annual Report on Form 10-K for the year ended September 30, 2023 filed with the Securities and Exchange Commission on November 29, 2023 (the “2023 Form 10-K”).

In November 2023, a portion of the Factoring Agreement between Embecta and BD for services to the U.S.

for the Company’s U.S.

subsidiary expired and terminated as a result of our implementation and onboarding of certain systems and services, including, but not limited to, information technology, procurement, quality and regulatory affairs, medical affairs, tax and treasury services, distribution logistics, and shared services infrastructure support for order-to-cash, source-to-pay, and record-to-report, which, for clarity, includes enterprise resource planning (“ERP”) systems (“Business Continuity Processes”) in North America.

The amount due from BD under the above agreements was $ 110.3 million at December 31, 2023 and is included in Amounts due from Becton, Dickinson and Company .

The amount due to BD under these agreements was $ 57.6 million at December 31, 2023 and is included in Amounts due to Becton, Dickinson and Company .

The closing of the transfers of certain assets and liabilities related to the Diabetes Care Business in certain jurisdictions, including China, Mexico, and Italy, as contemplated by the Separation and Distribution Agreement did not occur at Separation.

The transfers of the relevant local assets and liabilities for these deferred countries are expected to close at a future date.

As of December 31, 2023, the Company estimates that amounts due to BD related to certain assets and liabilities in deferred close jurisdictions is $ 13.5 million and are reflected in Accrued expenses .

As of December 31, 2023, the Company estimates that amounts due from BD related to certain assets and liabilities in deferred close jurisdictions are $ 7.4 million and is reflected in Prepaid expenses and other .

On March 28, 2024, we entered into (i) a second amendment (the “TSA Amendment”) to the TSA, dated as of March 31, 2022 and previously amended as of July 1, 2022 by and between Embecta and BD, and (ii) a second amendment (the “LSA Amendment”) to the LSA, dated January 1, 2022 and previously amended as of November 20, 2023, by and between Embecta and BD.

Pursuant to the TSA and the LSA, originally entered into in connection with the Separation, Embecta and BD and their respective affiliates provide each other, on an interim, transitional basis, the Business Continuity Processes.

Under the TSA Amendment and the LSA Amendment, BD granted Embecta, among other things, a limited extension until November 1, 2024 of certain services in a limited set of markets to support the Business Continuity Processes.

As of March 31, 2024, all factoring agreements between Embecta and BD have expired and terminated as a result of the Company's implementation and onboarding of certain systems and services, including, but not limited to, information technology, procurement, quality and regulatory affairs, medical affairs, tax and treasury services, distribution logistics, and shared services infrastructure support for order-to-cash, source-to-pay, and record-to-report, which, for clarity, includes enterprise resource planning (“ERP”) systems (“Business Continuity Processes”) in North America, and certain jurisdictions in Europe and Asia.

The amount due from BD under the above agreements was $ 43.3 million at March 31, 2024 and is included in Amounts due from Becton, Dickinson and Company .

The amount due to BD under these agreements was $ 38.5 million at March 31, 2024 and is included in Amounts due to Becton, Dickinson and Company .

The closing of the transfers of certain assets and liabilities related to the Diabetes Care Business in certain jurisdictions, including China, Mexico, Taiwan, India, Brazil, and Colombia as contemplated by the Separation and Distribution Agreement did not occur at Separation.

The transfers of the relevant local assets and liabilities in these certain jurisdictions are expected to close at a future date.

As of March 31, 2024, the Company estimates that amounts due from BD related to certain assets and liabilities in these certain jurisdictions are $ 18.9 million and are reflected in Prepaid expenses and other .

As of March 31, 2024, the Company estimates that amounts due to BD related to certain assets and liabilities in these certain jurisdictions is $ 7.0 million and are reflected in Accrued expenses .

Note 4 — Collaboration Agreement

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The Company believes that both parties are active participants in the operating activities of the collaboration and exposed to certain risks and rewards depending on commercial success.

The transaction included an upfront payment of $ 2.5 million for project costs, which was expensed to Research and development expense during the six month period ended March 31, 2023.

Upon successful commercialization of the iAGC, the Company will be responsible for the sales and marketing effort and would pay a royalty to the third-party based on future product sales to customers.

1 unchanged sentence

Note 5 — Other Operating Expenses

In connection with the Separation, the Company incurred separation and stand-up costs of approximately $ 26.4 million and $ 9.9 million during the three months ended December 31, 2023 and 2022, respectively.

The costs incurred primarily consist of costs associated with accounting, auditing, legal services, supply chain, employee retention, the implementation of the Company's new ERP system, and certain other costs to establish certain Business Continuity Processes and stand-alone functions to assist with the transition to being a stand-alone entity.

During the three months ended December 31, 2023, the Company recorded approximately $ 1.9 million of severance costs related to the optimization of certain business functions.

These costs were primarily recorded in the U.S.

Severance costs related to the optimization of certain business functions were not material in the comparable prior year period.

Liabilities for costs associated with these activities were not material to any period presented.

Note 6 — Contingencies

The Company was not a party to any material legal proceedings at December 31, 2023 or September 30, 2023, nor is it a party to any material legal proceedings as of the date of issuance of these Condensed Consolidated Financial Statements.

In connection with the Separation, the Company incurred separation and stand-up costs of approximately $ 32.6 million and $ 59.0 million during the three and six months ended March 31, 2024, respectively, and incurred separation and stand-up costs of approximately $ 25.6 million and $ 35.5 million during the three and six months ended March 31, 2023, respectively.

The costs incurred primarily consist of costs associated with accounting, auditing, legal services, marketing, supply chain, employee retention, the implementation of the Company's new ERP system, and certain other costs to

Dollar amounts are in millions except per share amounts or as otherwise specified.

establish certain Business Continuity Processes and stand-alone functions to assist with the transition to being a stand-alone entity.

Note 6 — Contingencies

The Company was not a party to any material legal proceedings at March 31, 2024 or September 30, 2023, nor is it a party to any material legal proceedings as of the date of issuance of these Condensed Consolidated Financial Statements.

Note 7 — Revenues

The Company’s policies for recognizing sales have not changed from those described in the 2023 Form 10-K.

The Company’s policies for recognizing revenue have not changed from those described in the 2023 Form 10-K.

The Company sells syringes, pen needles and other products used in the management of diabetes which are primarily sold to wholesalers and distributors that sell to retail and institutional channels who in turn sell to patients or use the products to deliver insulin injections to patients.

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Additional factors considered in the estimate of the Company’s rebate liability include the quantification of inventory that is either in stock at or in transit to the Company’s distributors, as well as the estimated lag time between the sale of product and the payment of corresponding rebates.

The Company’s liability attributed to variable consideration at December 31, 2023 and September 30, 2023 was $ 118.0 million and $ 36.4 million, respectively.

Sales deductions recorded as a reduction of gross revenues for the three months ended December 31, 2023 and 2022 were $ 126.7 million and $ 92.6 million, respectively.

The Company’s liability attributed to variable consideration at March 31, 2024 and September 30, 2023 was $ 177.2 million and $ 36.4 million, respectively.

Sales deductions recorded as a reduction of gross revenues for the three months ended March 31, 2024 and 2023 were $ 138.5 million and $ 95.2 million, respectively.

Sales deductions recorded as a reduction of gross revenues for the six months ended March 31, 2024 and 2023 were $ 265.2 million and $ 187.8 million, respectively.

Disaggregation of Revenues

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Contract assets consist of the Company’s right to consideration that is conditional upon its future performance pursuant to private label agreements and are presented within Prepaid expenses and other in the Condensed Consolidated Balance Sheets.

The Company’s contract asset balance was $ 1.2 million as of both December 31, 2023 and September 30, 2023.

The Company’s contract asset balance was $ 1.2 million as of both March 31, 2024 and September 30, 2023.

Note 8 — Segment and Geographical Data

2 unchanged sentences

Disaggregation of Revenues

The Company has distribution agreements with regional or national distributors (including wholesalers and medical suppliers) to ensure broad availability of its products as well as a direct sales force in certain countries and regions around the world.

Dollar amounts are in millions except per share amounts or as otherwise specified.

In the United States and Canada, the Company utilizes its large and small key account managers that call on payers, retailers, wholesalers and institutional customers, and field-based territory managers that call on health care providers and pharmacies.

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The Company disaggregates its revenue by geography as management believes this category best depicts how the nature, amount, and timing of revenues and cash flows are affected by economic factors.

Dollar amounts are in millions except per share amounts or as otherwise specified.

Revenues by geographic region are as follows:

Three months ended December 31,

Three months ended March 31, Six months ended March 31,

2024 2023 2024 2023

United States $ 147.6 $ 146.4 $ 296.2 $ 295.7

International (1)

139.6 130.7 268.3 257.1

Total $ 287.2 $ 277.1 $ 564.5 $ 552.8

(1) For the three months ended December 31, 2023 and 2022, no individual country outside of the United States generated net revenues that represented more than 10.0% of total revenues.

(1) For the three and six months ended March 31, 2024 and 2023, no individual country outside of the United States generated net revenues that represented more than 10.0% of total revenues.

Note 9 — Stock-Based Compensation

Stock-Based Compensation Expense

Total direct and allocated stock-based compensation expense for the three months ended December 31, 2023 and 2022 and the respective income tax benefits recognized by the Company in the Condensed Consolidated Statements of Income are as follows:

Three months ended December 31,

Total stock-based compensation expense for the three and six months ended March 31, 2024 and 2023 and the respective income tax benefits recognized by the Company in the Condensed Consolidated Statements of Income are as follows:

Three months ended March 31, Six months ended March 31,

2024 2023 2024 2023

Cost of products sold $ 1.1 $ 0.6 $ 2.0 $ 1.2

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Tax benefit associated with stock-based compensation costs recognized $ 0.5 $ 0.7 $ 1.2 $ 1.5

The following table summarizes the Company's total stock-based compensation expense by classification of award for the three months ended December 31, 2023 and 2022:

The following table summarizes the Company's total stock-based compensation expense by classification of award for the three and six months ended March 31, 2024 and 2023:

Three months ended March 31, Six Months Ended March 31,

2024 2023 2024 2023

Equity Awards $ 6.5 $ 5.6 $ 13.8 $ 11.1

1 unchanged sentence

Total $ 6.5 $ 5.8 $ 13.9 $ 11.3

The following table summarizes the Company's total stock-based compensation expense by award type for the three months ended December 31, 2023 and 2022:

Dollar amounts are in millions except per share amounts or as otherwise specified.

The following table summarizes the Company's total stock-based compensation expense by award type for the three and six months ended March 31, 2024 and 2023:

Three months ended March 31, Six Months Ended March 31,

2024 2023 2024 2023

Time-Vested Restricted Stock Units (TVUs)

$ 5.2 $ 4.0 $ 10.6 $ 8.1

Performance-Based Restricted Stock Units (PSUs)

0.4 0.6 1.3 0.7

Stock Appreciation Rights (SARs)

0.9 1.2 2.0 2.5

Total $ 6.5 $ 5.8 $ 13.9 $ 11.3

Time Vested Restricted Stock Units ("TVUs")

During the three months ended December 31, 2023 , Embecta granted 1,277,644 restricted stock units ("RSUs") in the form of TVUs to employees which vest ratably over three years , subject to continued employment of the recipients.

During the six months ended March 31, 2024 , Embecta granted 1,393,808 restricted stock units ("RSUs") in the form of TVUs to employees.

TVUs vest on a graded basis over a period of three years .

The related stock-based compensation expense is recorded over the requisite service period, which is the vesting period or is based on retirement eligibility.

These awards accumulate dividend equivalents, which are provided as additional units and are subject to the same vesting requirements as the underlying grant.

Dollar amounts are in millions except per share amounts or as otherwise specified.

A summary of TVUs outstanding as of December 31, 2023 and changes during the three months ended December 31, 2023 are as follows:

A summary of TVUs outstanding as of March 31, 2024 and changes during the six months ended March 31, 2024 are as follows:

RSUs (in thousands) Weighted Average Grant Date Fair Value

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Forfeited, canceled or expired ( 38.2 ) 23.51

Nonvested at December 31 2,078.5 $ 22.16

Expected to vest at December 31 1,970.9 $ 22.16

Nonvested at March 31 2,064.7 $ 21.59

Expected to vest at March 31 1,954.6 $ 21.64

*Includes accumulated nonvested dividend equivalents

**The RSUs distributed include shares withheld for taxes that are not formally issued to the market.

The weighted average grant date fair value of TVUs granted during the three months ended December 31, 2023 is $ 17.52 and the total fair value of TVUs vested during the three months ended December 31, 2023 is $ 10.8 million.

At December 31, 2023, the weighted average remaining vesting term of TVUs is 2.3 years.

The weighted average grant date fair value of TVUs granted during the six months ended March 31, 2024 is $ 17.42 and the total fair value of TVUs vested during the six months ended March 31, 2024 is $ 13.8 million.

At March 31, 2024, the weighted average remaining vesting term of TVUs is 2.1 years.

Performance Based Restricted Stock Units ("PSUs")

During the three months ended December 31, 2023 , Embecta awarded 531,253 RSUs in the form of PSUs to certain executive officers and employees which vest after three years , subject to continued employment of the recipients and the achievement of certain performance metric targets.

During the six months ended March 31, 2024 , Embecta awarded 541,958 RSUs in the form of PSUs to certain executive officers and employees which cliff vest after three years , subject to continued employment of the recipients and the achievement of certain performance metric targets.

The Company has identified certain performance metrics associated with these awards and certain targets will be fully established at a future date.

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As the service inception date precedes the accounting grant date, the Company recognizes stock-based compensation expense for each separately-vesting tranche over the requisite service period based on the fair value at each reporting date.

The requisite service period is equal to the vesting period or is based on retirement eligibility.

These awards accumulate dividend equivalents, which are provided as additional units and are subject to the same vesting requirements as the underlying grant.

As of December 31, 2023, there were 709,112 RSUs in the form of PSUs that have been awarded for which a grant date has not yet been established.

As of both December 31, 2023 and September 30, 2023, there were approximately 57.8 thousand nonvested PSUs with a weighted average grant date fair value of $ 30.24 .

As of December 31, 2023, there were approximately 54.6 thousand nonvested PSUs expected to vest with a weighted average grant date fair value of $ 30.24 .

At December 31, 2023, the weighted average remaining vesting term of PSUs is 1.9 years.

As of March 31, 2024 , there were 725,912 RSUs in the form of PSUs that have been awarded, inclusive of accumulated dividend equivalents, for which a grant date has not yet been established.

Dollar amounts are in millions except per share amounts or as otherwise specified.

As of both March 31, 2024 and September 30, 2023, there were approximately 57.8 thousand nonvested PSUs for which a grant date has been established with a weighted average grant date fair value of $ 30.24 .

As of March 31, 2024, there were approximately 54.6 thousand nonvested PSUs for which a grant date has been established that are expected to vest with a weighted average grant date fair value of $ 30.24 .

At March 31, 2024, the weighted average remaining vesting term of PSUs is 1.7 years.

Stock Appreciation Rights

A summary of stock appreciation rights ("SARs") outstanding as of December 31, 2023 and changes during the three months ended December 31, 2023 are as follows:

A summary of stock appreciation rights ("SARs") outstanding as of March 31, 2024 and changes during the six months ended March 31, 2024 are as follows:

SARs (in thousands) Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value

1 unchanged sentence

Forfeited, canceled or expired ( 45.3 ) 27.36

Balance at December 31 1,830.5 $ 29.07 7.5 $ 0.1

Vested and expected to vest at December 31 1,775.5 29.04 7.4 $ 0.1

Exercisable at December 31 829.6 $ 27.84 6.8 $ 0.1

Dollar amounts are in millions except per share amounts or as otherwise specified.

No SARs w ere exercised during the three months ended December 31, 2023.

Balance at March 31 1,786.4 $ 29.10 7.2 $ —

Vested and expected to vest at March 31 1,733.8 29.07 7.2 $ —

Exercisable at March 31 829.6 $ 27.84 6.5 $ —

No SARs w ere exercised during the six months ended March 31, 2024.

Unrecognized Stock-Based Compensation Expense and Other Stock Plans

The amount of unrecognized compensation expense for all non-vested stock-based awards granted as of December 31, 2023, is approximately $ 49.8 million which is expected to be recognized over a weighted-average remaining life of approximately 2.3 years.

At December 31, 2023, 2.6 million shares were authorized for future grants under the 2022 Employee and Director Equity Based Compensation Plan.

The amount of unrecognized compensation expense for all non-vested stock-based awards granted as of March 31, 2024, is approximately $ 42.0 million which is expected to be recognized over a weighted-average remaining life of approximately 2.1 years.

At March 31, 2024, 2.6 million shares were authorized for future grants under the Company's 2022 Employee and Director Equity Based Compensation Plan.

Note 10 — Goodwill, Intangible Assets, and Cloud Computing Arrangements

1 unchanged sentence

Goodwill and Other Intangible Assets consisted of:

December 31, 2023 September 30, 2023

March 31, 2024 September 30, 2023

Amortized intangible assets

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Total Goodwill and Other Intangible Assets $ 24.1 $ 24.7

Dollar amounts are in millions except per share amounts or as otherwise specified.

Cloud Computing Arrangements

The Company capitalizes costs associated with the development of cloud computing arrangements in a manner consistent with internally developed software.

The total balance of capitalized costs associated with these arrangements as of December 31, 2023 and September 30, 2023 is $ 50.4 million and $ 38.0 million, respectively, which primarily relates to the implementation of the Company's new ERP system.

These capitalized costs are included in Deferred Income Taxes and Other Assets.

Costs amortized during the three months ended December 31, 2023 were $ 0.4 million and are included in Other operating expenses .

Costs amortized during the three months ended December 31, 2022 were not material to the Company's condensed consolidated financial results.

As of December 31, 2023, cloud computing arrangement assets in-service have useful lives which range from approximately three to nine years .

Capitalized costs are included in Prepaid expenses and other and Deferred Income Taxes and Other Assets.

Capitalized costs to implement cloud computing arrangements at cost and accumulated amortization were as follows:

March 31, 2024 September 30, 2023

Short-term portion

Long-term portion

Total Capitalized implementation costs

$ 59.3 $ 38.0

accumulated amortization ( 1.6 ) —

Total Capitalized implementation costs, net

$ 57.7 $ 38.0

Costs amortized during the three and six months ended March 31, 2024 were $ 1.2 million and $ 1.6 million, respectively, and are included in Other operating expenses .

For the three and six months ended March 31, 2023 there were no costs recognized related to the implementation of these cloud computing arrangements due to the timing of when these projects were placed into service.

As of March 31, 2024, cloud computing arrangement assets in-service have useful lives which range from approximately three to nine years .

Note 11 — Long-Term Debt

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A commitment fee applies to the unused portion of the Revolving Credit Facility, equal to 0.25 % per annum.

As of December 31, 2023, no amount has been drawn on the Revolving Credit Facility.

Dollar amounts are in millions except per share amounts or as otherwise specified.

consolidated earnings before interest, taxes, depreciation and amortization, and subject to other adjustments, must meet certain defined limits which are tested on a quarterly basis in accordance with the terms of the Credit Agreement and the 5.00 % Notes and 6.75 % Notes.

As of March 31, 2024, no amount has been drawn on the Revolving Credit Facility.

The Credit Agreement and the indentures for Embecta's outstanding 5.00 % senior secured notes due February 2030 (the " 5.00 % Notes") and 6.75 % senior secured notes due February 2030 (the " 6.75 % Notes") contain customary financial covenants, including a total net leverage ratio covenant, which measures the ratio of (i) consolidated total net debt to (ii) consolidated earnings before interest, taxes, depreciation and amortization, and subject to other adjustments, must meet certain defined limits which are tested on a quarterly basis in accordance with the terms of the Credit Agreement and the 5.00 % Notes and 6.75 % Notes.

In addition, the Credit Agreement contains covenants that will limit, among other things, Embecta’s ability to prepay, redeem or repurchase its subordinated and junior lien debt, incur additional debt, make acquisitions, merge with other entities, pay dividends or distributions, redeem or repurchase equity interests, and create or become subject to liens.

The following is a summary of Embecta's total debt outstanding as of December 31, 2023:

The following is a summary of Embecta's total debt outstanding as of March 31, 2024:

Term Loan due March 2029 $ 931.0

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Long-term debt $ 1,591.8

The debt issuance costs on the Term Loan, 5.00 % Notes, 6.75 % Notes and the discount on the Term Loan are reported in the Condensed Consolidated Balance Sheets as a reduction of debt and are amortized as a component of Interest expense, net over the term of the related debt using the effective interest method.

The debt issuance costs on the Term Loan, 5.00 % Notes, 6.75 % Notes and the discount on the Term Loan are reported in

Dollar amounts are in millions except per share amounts or as otherwise specified.

the Condensed Consolidated Balance Sheets as a reduction of debt and are amortized as a component of Interest expense, net over the term of the related debt using the effective interest method.

The schedule of principal payments required on long-term debt for the next five fiscal years and thereafter is as follows:

Thereafter 1,588.2

The estimated fair value of long-term debt (including current portion) at December 31, 2023 was $ 1,510.5 million compared with a carrying value (which includes a reduction for unamortized debt issuance costs and discounts) of $ 1,602.4 million.

The estimated fair value of long-term debt (including current portion) at March 31, 2024 was $ 1,441.8 million compared with a carrying value (which includes a reduction for unamortized debt issuance costs and discounts) of $ 1,601.3 million.

Fair value was estimated using inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability and would be considered Level 2 in the fair value hierarchy.

Note 12 — Earnings per Share

The calculation of earnings per basic and diluted common share for the three months ended December 31, 2023 and 2023 was as follows:

The calculation of earnings per basic and diluted common share for the three and six months ended March 31, 2024 and 2023 was as follows:

Three Months Ended

March 31, Six Months Ended

($ in millions and shares in thousands, except per share amounts) 2024 2023 2024 2023

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The computation of earnings per diluted share excludes the effect of the potential exercise of stock-based awards, when the effect of the potential exercise would be anti-dilutive.

For the three months ended December 31, 2023 , and 2022, 3.2 million and 2.0 million of dilutive share equivalents issuable under stock-based compensation plans were excluded from the diluted shares outstanding calculation because the result would have been antidilutive.

Dollar amounts are in millions except per share amounts or as otherwise specified.

For the three months ended March 31, 2024 and 2023, 4.2 million and 2.2 million, respectively, and for the six months ended March 31, 2024 and 2023, 2.8 million and 1.8 million, respectively, of dilutive share equivalents issuable under stock-based compensation plans were excluded from the diluted shares outstanding calculation because the result would have been antidilutive.

Note 13 — Income Taxes

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A significant portion of the Company's earnings are taxed in jurisdictions with tax rates that are lower than the statutory tax rate of the United States.

The effective tax rate can vary from quarter to quarter because of changes in the global pretax income or geographical mix of the Company's earnings, changes in tax laws and matters related to tax audits.

The effective tax rates were ( 40.6 )% and 37.3 % for the three months ended December 31, 2023 and 2022, respectively.

The decrease in the Company’s effective tax rate from the prior comparative period is primarily due to a tax benefit of approximately $ 17.1 million for the establishment of a deferred tax asset related to tax law changes in Switzerland.

The tax law changes instituted a higher cantonal tax rate and additional tax basis that is amortizable for income tax purposes over a period of seven years.

The effective tax rate can change from quarter to quarter because of variability in global pretax income or geographical mix of the Company's earnings, changes in tax laws and matters related to tax audits.

The effective tax rates were ( 191.9 )% and 42.9 % for the three months ended March 31, 2024 and 2023, respectively.

The decrease in the Company’s effective tax rate from the prior comparative period is primarily due to lower withholding taxes on undistributed foreign earnings which includes a discrete tax benefit of approximately $ 18.8 million related to Swiss withholding taxes from prior years, reduced unrecognized tax benefits, and lower income in the current period which increases the variability of the effective tax rate.

The effective tax rates were ( 102.5 )% and 39.0 % for the six months ended March 31, 2024 and 2023, respectively.

The decrease in the Company’s effective tax rate from the prior comparative period is primarily due to lower withholding taxes on undistributed foreign earnings which includes a discrete tax benefit of approximately $ 18.8 million related to Swiss withholding taxes from prior years, a tax benefit of approximately $ 17.1 million for the establishment of a deferred tax asset attributed to a higher Swiss cantonal tax rate and additional tax basis that is amortizable for income tax purposes over

Dollar amounts are in millions except per share amounts or as otherwise specified.

a period of seven years, reduced unrecognized tax benefits, and lower income in the current period which increases the variability of the effective tax rate.

Note 14 — Financial Instruments and Fair Value Measurements

The following reconciles Cash and cash equivalents reported within the Condensed Consolidated Balance Sheets as of December 31, 2023 and September 30, 2023, to the total amounts shown in the Condensed Consolidated Statements of Cash Flows:

December 31, 2023 September 30, 2023

Cash and cash equivalents $ 298.7 $ 326.5

Cash and cash equivalents as of December 31, 2023 includes cash held in money market funds and other cash equivalents.

All cash and cash equivalents are Level 1 in the fair value hierarchy.

Interest income on Cash and cash equivalents was $ 3.4 million and $ 1.1 million for the three months ended December 31, 2023 and 2022, respectively, and is included as a component of Interest expense, net .

The following reconciles Cash and equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets as of March 31, 2024 and September 30, 2023, to the total amounts shown in the Condensed Consolidated Statements of Cash Flows:

March 31, 2024 September 30, 2023

Cash and equivalents

$ 299.8 $ 326.3

Restricted cash

Cash and equivalents and restricted cash

$ 306.5 $ 326.5

Cash and equivalents as of March 31, 2024 includes cash held in money market funds and other cash equivalents.

All cash and equivalents are Level 1 in the fair value hierarchy.

Interest income on Cash and equivalents was $ 2.9 million and $ 2.7 million for the three months ended March 31, 2024 and 2023, respectively, and $ 6.3 million and $ 3.8 million for the six months ended March 31, 2024 and 2023, respectively, and is included as a component of Interest expense, net .

Restricted cash consists of cash not readily available for use in the Company's operating activities.

The Company's restricted cash balance is primarily pledged as collateral for bank guarantees related to certain customer performance guarantees and property leases internationally.

Foreign Currency Risks and Related Strategies

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Transactional currency exposures that arise from entering into transactions, generally on an intercompany basis, in non-hyperinflationary countries that are denominated in currencies other than the functional currency are mitigated primarily through the use of forward contracts.

The notional amounts of the Company’s foreign currency-related derivative instruments were as follows as of December 31, 2023 and September 30, 2023, respectively:

Hedge Designation December 31, 2023 September 30, 2023

The notional amounts of the Company’s foreign currency-related derivative instruments were as follows as of March 31, 2024 and September 30, 2023, respectively:

Hedge Designation March 31, 2024 September 30, 2023

Foreign exchange contracts (a) Undesignated $ 10.1 $ 6.7

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Concentration of Credit Risk

Three of the Company’s customers represented at least 10.0% of total gross revenues individually and, in the aggregate, represented approximately 40.8 % for the three months ended December 31, 2023.

Four of the Company's customers represented at least 10.0% of total gross trade receivables individually and, in the aggregate, represented approximately 60.9 % as of December 31, 2023.

Three of the Company’s customers represented at least 10.0% of total gross revenues individually and, in the aggregate, represented approximately 42.0 % for the three months ended March 31, 2024, and three of the Company's customers represented at least 10.0% of total gross revenues individually and, in the aggregate, represented approximately 42.0 % of total revenues for the six months ended March 31, 2024.

Four of the Company's customers represented at least 10.0% of total gross trade receivables individually and, in the aggregate, represented approximately 63.6 % as of March 31, 2024.

Substantially all of the Company’s trade receivables are due from public and private entities involved in the healthcare industry.

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Property, Plant and Equipment, Net consisted of:

December 31, 2023 September 30, 2023

March 31, 2024 September 30, 2023

Land $ 2.3 $ 2.3

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The Company's leases are included in its Condensed Consolidated Balance Sheets as follows:

December 31, 2023 September 30, 2023

March 31, 2024 September 30, 2023

Finance Leases

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Dollar amounts are in millions except per share amounts or as otherwise specified.

Supplemental cash flow information related to leases for the three months ended December 31, 2023 and 2022 were as follows:

For both the three months ended December 31, 2023 and 2022, right of use assets obtained in exchange for lease liabilities were not material.

December 31, 2023

Supplemental cash flow information related to leases for the six months ended March 31, 2024 and 2023 were as follows:

March 31, 2024 March 31, 2023

Right of use assets obtained in exchange for lease liabilities

Financing Leases $ — $ —

Operating Leases 1.5 14.0

March 31, 2024 March 31, 2023

Cash used for amounts included in the measurement of lease liabilities

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Operating cash flows from Finance Lease

For the three months ended December 31, 2022, cash used for amounts included in the measurement of lease liabilities was not material.

Maturities of the Company's finance and operating lease liabilities as of December 31, 2023 by fiscal year are as follows:

Maturities of the Company's finance and operating lease liabilities as of March 31, 2024 by fiscal year are as follows:

Finance Leases Operating Leases Total

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements