What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-06 compared with 2024-08-09 · 84 added, 120 removed, 169 unchanged (55% of the section changed)

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Since then, we have built a world-class organization with a unique manufacturing, supply chain and commercial footprint.

We have a broad portfolio of marketed products, including a variety of pen needles, syringes and safety injection devices, which are complemented by our proprietary digital application designed to assist people with managing their diabetes.

We have a broad portfolio of marketed products, including a variety of pen needles, syringes and safety injection devices.

Our pen needles are sterile, single-use, medical devices, designed to be used in conjunction with pen injectors that inject insulin or other diabetes medications.

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We face significant pricing pressures from competitors in the pen needle and insulin syringe categories who not only can provide competitive products at lower costs, but also provide payors and customers with more choices for formulary partners in these categories.

In addition, t he increased scrutiny by regulators on healthcare spending, which accelerated in light of the COVID-19 pandemic, along with a shift towards volume-based procurement and group purchasing organizations, which generally values lower cost over product features, benefits and quality, have placed significant pressure on Embecta to lower price in both developed and emerging markets.

In addition, the increased scrutiny by regulators on healthcare spending, which accelerated in light of the COVID-19 pandemic, along with a shift towards volume-based procurement and group purchasing organizations, which generally values lower cost over product features, benefits and quality, have placed significant pressure on Embecta to lower price in both developed and emerging markets.

These trends may reduce our operating margins, which are only partially offset by our ability to differentiate our products and sell at higher prices.

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Changes in Clinical Practice.

Introduction of new drugs and increased penetration of oral anti-diabetic drugs (e.g., SGLT-2s), GLP-1s and GLP-1 combination products have delayed initiation of insulin therapy and contributed to less demand for our products.

Introduction of new drugs and increased penetration of oral and once-weekly anti-diabetic drugs (e.g., SGLT-2s), GLP-1s and GLP-1 combination products have delayed initiation of insulin therapy and contributed to less demand for our products.

New drug therapies, including weekly insulin, are targeted to challenge the current diabetes treatment paradigm, including the frequency insulin is dosed (weekly vs.

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To date we have been able to successfully mitigate this disruption and provide uninterrupted supply to our customers by increasing our inventory levels and taking other measures.

In December 2023, we submitted our first 510(k) premarket filing to the U.S.

Food and Drug Administration ("FDA") for our proprietary disposable insulin delivery system.

On March 28, 2024, we entered into (i) a second amendment (the “TSA Amendment”) to the Transition Services Agreements ("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 Logistics Services Agreements ("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.

On November 22, 2024, the Company's Board of Directors approved a plan to discontinue internal and external investment in the research and development of our patch pump program.

As a result of this decision, the Company is in the process of executing an organizational Restructuring Plan which is expected to be completed by the end of the first half of the fiscal year, with the cumulative pretax costs to be incurred by the Company to implement the Restructuring Plan estimated to be $35.0 million to $45.0 million.

In addition, we discontinued our commercial operation plans for the insulin delivery system, including the previous intended limited launch.

The Company plans to refocus its investment on its core business while looking to optimize free cash flow and strengthen its balance sheet by paying down debt.

We continue to monitor the conflict in Ukraine and the associated sanctions and other restrictions.

We also are monitoring the Israel-Hamas war and Houthi attacks on commercial shipping vessels and other naval vessels.

As of August 9, 2024, there is no material impact to our business operations and financial performance as a result of the aforementioned conflicts.

As of February 6, 2025, there is no material impact to our business operations and financial performance as a result of the aforementioned conflicts.

However, the full impact of the conflicts on our business operations and financial performance remains uncertain and will depend on future developments, including the severity and duration of the conflicts and their impact on regional and global economic conditions.

We will continue to monitor these conflicts and assess the related restrictions and other effects on our business.

In addition, our revenues and results of operations have been affected by various fluctuations in macroeconomic conditions and regulatory and policy changes, both on a global level and in particular markets, which include inflation and slowing economic growth and contractions, a rising interest rate environment, supply chain interruptions, tariff policy changes, volatility in capital markets and the availability of credit, tax rates and the rate of exchange between the United States dollar and foreign currencies.

In addition, our revenues and results of operations have been affected by various fluctuations in macroeconomic conditions and regulatory and policy changes, both on a global level and in particular markets, which include inflation and slowing economic growth and contractions, a changing interest rate environment, supply chain interruptions, tariff policy changes, volatility in capital markets and the availability of credit, tax rates and the rate of exchange between the United States dollar and foreign currencies.

The nature and extent of the impact of these factors among others varies by region and remains uncertain and unpredictable and may affect our business.

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Our unaudited Condensed Consolidated Statements of Income are as follows:

Three months ended June 30, Nine months ended June 30,

Three months ended December 31,

Revenues $ 261.9 $ 277.3 (5.6) %

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Other income (expense), net (1.5) (3.5) (57.1)

Income Before Income Taxes 27.0 20.1 34.3 51.2 100.7 (49.2)

Income tax provision (benefit)

12.3 4.9 151.0 (12.5) 36.3 (134.4)

(Loss) Income Before Income Taxes (0.7) 14.3 (104.9)

Income tax (benefit) (0.7) (5.8) (87.9)

Net Income $ — $ 20.1 (100.0)

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Diluted $ — $ 0.35 (100.0) %

Three Months Ended June 30, 2024 Summary (on a comparative basis)

Key financial results for the three months ended June 30, 2024 were as follows:

• Revenue decreased by $13.6 million to $272.5 million from $286.1 million;

• Gross profit increased by $0.6 million to $190.1 million from $189.5 million.

Gross profit as a percent of revenue was 69.8%, as compared to 66.2% in the prior year comparative period;

• Operating income increased by $4.6 million to $55.9 million from $51.3 million;

• Net income decreased by $0.5 million to $14.7 million from $15.2 million.

Nine Months Ended June 30, 2024 Summary (on a comparative basis)

Key financial results for the nine months ended June 30, 2024 were as follows:

Three Months Ended December 31, 2024 Summary (on a comparative basis)

Key financial results for the three months ended December 31, 2024 were as follows:

• Revenue decreased by $15.4 million to $261.9 million from $277.3 million;

• Gross profit decreased by $6.7 million to $561.4 million, compared to $568.1 million.

• Gross profit decreased by $28.8 million to $157.1 million from $185.9 million.

Gross profit as a percent of revenue was 60.0%, as compared to 67.0% in the prior year comparative period;

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• Net income decreased by $20.1 million to $0.0 million from $20.1 million.

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

Our revenues decreased by $13.6 million, or 4.8%, to $272.5 million for the three months ended June 30, 2024 as compared to revenues of $286.1 million for the three months ended June 30, 2023.

Our revenues decreased by $15.4 million, or 5.6%, to $261.9 million for the three months ended December 31, 2024 as compared to revenues of $277.3 million for the three months ended December 31, 2023.

Changes in revenues are driven by the volume of goods that the Company sells, the prices it negotiates with customers, and changes in foreign exchange rates.

The decrease in revenues was driven by $17.9 million of unfavorable changes in volume and $2.0 million associated with the negative impact of foreign currency translation primarily due to the strengthening of the U.S.

This was partially offset by $7.8 million of favorable gross-to-net adjustments resulting from changes in estimates, $4.9 million of favorable changes in price, and a $0.6 million increase in contract manufacturing revenues related to sales of non-diabetes products to BD.

Our revenues decreased by $1.9 million, or 0.2%, to $837.0 million for the nine months ended June 30, 2024 as compared to revenues of $838.9 million for the nine months ended June 30, 2023.

The decrease in revenues was driven by $11.4 million of unfavorable changes in volume, $2.7 million associated with the negative impact of foreign currency translation primarily due to the strengthening of the U.S.

dollar, and a $2.5 million decrease in contract manufacturing revenues related to sales of non-diabetes products to BD.

This was partially offset by $14.0 million of favorable changes in price and $0.7 million of favorable gross-to-net adjustments resulting from changes in estimates.

Revenues by geographic region are as follows:

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

United States $ 143.6 $ 153.9 $ 439.8 $ 449.6

International

128.9 132.2 397.2 389.3

Total $ 272.5 $ 286.1 $ 837.0 $ 838.9

This was partially offset by a $2.9 million increase in contract manufacturing revenues related to sales of non-diabetes products to BD and $1.6 million of favorable changes in price.

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

Cost of products sold

Cost of products sold decreased by $14.2 million, or 14.7%, to $82.4 million for the three months ended June 30, 2024 as compared to $96.6 million for the three months ended June 30, 2023.

Cost of products sold as a percentage of revenues was 30.2% for the three months ended June 30, 2024 as compared to 33.8% for the three months ended June 30, 2023.

The decrease in cost of products sold for the three month comparative period was primarily driven by lower net revenues and the impact of favorable profit in inventory adjustments as a result of inventory that was sold to external customers that was manufactured in anticipation of our ERP system and other Business Continuity Processes that went live during fiscal 2024.

We are not expecting to record a favorable profit in inventory adjustment in the fourth quarter of fiscal 2024.

This was partially offset by inflation on the costs of certain raw materials (including freight), direct labor, and overhead, and unfavorable impacts due to foreign exchange rates.

We intend to continue to work to improve productivity to help partially offset the impact of these increased costs.

Cost of products sold increased by $4.8 million, or 1.8%, to $275.6 million for the nine months ended June 30, 2024 as compared to $270.8 million for the nine months ended June 30, 2023.

Cost of products sold as a percentage of revenues was 32.9% for the nine months ended June 30, 2024 as compared to 32.3% in the nine months ended June 30, 2023.

The increase in cost of products sold for the nine month comparative period was primarily driven by the impact of inflation on the costs of certain raw materials (including freight), direct labor, and overhead, the impact of negative year-over-year manufacturing variances primarily attributable to the planned temporary shutdown of our Suzhou, China facility as it relates to production for the domestic Chinese market, and unfavorable impacts due to foreign exchange rates.

We intend to continue to work to improve productivity to help partially offset these increased costs.

This was partially offset by the impact of profit in inventory adjustments as a result of inventory that was sold to external customers that was manufactured in anticipation of our ERP system and other Business Continuity Processes that went live during fiscal 2024, as well as lower net revenues.

Cost of products sold increased by $13.4 million, or 14.7%, to $104.8 million for the three months ended December 31, 2024 as compared to $91.4 million for the three months ended December 31, 2023.

Cost of products sold as a percentage of revenues was 40.0% for the three months ended December 31, 2024 as compared to 33.0% for the three months ended December 31, 2023.

The increase in cost of products sold for the three month comparative period was primarily driven by a non-cash asset impairment charge to write down the carrying value of certain property and equipment as a result of the Company's plan to discontinue the patch pump program.

Also, contributing to the period over period increase was the impact of net changes in profit in inventory adjustments.

These items were partially offset by the impact of lower sales recognized in the current period as compared to the prior year period.

Selling and administrative expenses

Selling and administrative expenses decreased by $1.9 million, or 2.2%, to $85.7 million for the three months ended June 30, 2024 as compared to $87.6 million for the three months ended June 30, 2023.

The decrease for the three month comparative period was primarily driven by actions taken in the current period to reduce headcount and marketing expense in addition to lower TSA and LSA costs with BD.

This was offset by increased outbound freight and warehousing costs.

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

Selling and administrative expenses increased by $22.7 million, or 9.2%, to $268.3 million for the nine months ended June 30, 2024 as compared to $245.6 million for the nine months ended June 30, 2023.

The increase for the nine month comparative period was primarily driven by an increase in compensation and benefit costs due to increased headcount on average in the current period in addition to increased outbound freight and warehousing costs.

This was partially offset primarily by lower TSA and LSA costs with BD incurred in the current year period.

Selling and administrative expenses decreased by $9.2 million, or 10.2%, to $81.1 million for the three months ended December 31, 2024 as compared to $90.3 million for the three months ended December 31, 2023.

The decrease for the three month comparative period was primarily driven by lower TSA and LSA costs with BD in addition to lower compensation and marketing expense recognized in the current period.

Research and development expenses

Research and development expenses decreased by $2.2 million, or 9.7%, to $20.4 million for the three months ended June 30, 2024 as compared to $22.6 million for the three months ended June 30, 2023.

Research and development expenses decreased by $2.6 million, or 4.2%, to $59.0 million for the nine months ended June 30, 2024 as compared to $61.6 million for the nine months ended June 30, 2023.

The decrease for the three and nine month comparative periods were primarily driven by timing of payments made in connection with our insulin patch pump platform.

Research and development expenses increased by $0.1 million, or 0.5%, to $20.3 million for the three months ended December 31, 2024 as compared to $20.2 million for the three months ended December 31, 2023.

The increase for the three month comparative period was primarily driven by certain asset impairments attributed to our decision to discontinue internal and external investment in the research and development of the Company's patch pump program.

This was partially offset by a reduction in payments made in connection with the development of our insulin patch pump program in the current period as compared to the prior period, given the discontinuation of the patch pump program.

We expect our research and development expense to decrease sequentially in fiscal year 2025 compared to fiscal year 2024.

Other operating expenses

Other operating expenses incurred primarily relate to accounting, auditing, legal services, marketing, supply chain, employee retention, costs associated with the implementation of our new ERP system and other Business Continuity Processes, and certain other costs to establish certain stand-alone functions to assist with the transition to being a stand-alone entity.

As we continue to stand-up various corporate functions as a stand-alone publicly-traded company, we expect to incur similar costs associated with the same type of activities in the current year.

For the three and nine months ended June 30, 2024, we recognized costs associated with the amortization of cloud computing arrangements.

For the three and nine months ended June 30, 2023 there were no amortization of implementation costs associated with cloud computing arrangements due to the timing of when these projects were placed into service.

Other operating expenses incurred primarily relate to accounting, auditing, legal services, marketing, supply chain, employee retention, costs associated with the implementation of our new ERP system and other Business Continuity Processes, costs associated with brand transition, and certain other costs to establish certain stand-alone functions to assist with the transition to being a stand-alone entity.

These costs also include certain severance costs related to the optimization of certain business functions as we transition to being a stand-alone entity and severance and contract termination costs associated with the discontinued patch pump program.

Other operating expenses are as follows:

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

Three months ended December 31,

Costs related to the Separation $ 10.4 $ 26.4

Amortization of cloud computing arrangements

Costs associated with the discontinued patch pump program 14.3 —

Business optimization and severance related costs — 1.9

Other (0.2) 1.2

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Interest expense, net

Interest expense, net increased by $0.8 million to $27.8 million for the three months ended June 30, 2024 as compared to $27.0 million for the three months ended June 30, 2023.

Interest expense, net increased by $3.9 million to $83.3 million for the nine months ended June 30, 2024 as compared to $79.4 million for the nine months ended June 30, 2023.

The increases for both comparative periods were primarily a result of higher interest rates on our variable rate debt which is attributable to increases in SOFR that impacted our Term Loan.

This was partially offset by an increase in interest income from amounts held in interest bearing accounts and money market funds.

Interest expense, net increased by $0.2 million to $27.9 million for the three months ended December 31, 2024 as compared to $27.7 million for the three months ended December 31, 2023, which equates to a relatively flat change period over period.

It remains unclear whether the United States Federal Reserve will increase or decrease the benchmark interest rate during the remainder of fiscal 2025.

An increase in the benchmark interest rate would result in an increase in interest expense on our variable rate debt and a decrease in the benchmark interest rate would result in a decrease in interest expense on our variable rate debt.

Other income (expense), net

Other income (expense), net, was $(1.1) million and $(4.2) million for the three months ended June 30, 2024 and 2023, respectively.

Other income (expense), net, was $(6.1) million and $(15.6) million for the nine months ended June 30, 2024 and 2023, respectively.

The costs incurred for all periods primarily relate to amounts due to BD for income taxes payable incurred in deferred jurisdictions where BD is considered the primary obligor.

We do not expect to incur any additional amounts where BD is considered the primary obligor.

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

Income tax provision (benefit)

The effective tax rates were 45.6% and 24.4% for the three months ended June 30, 2024 and 2023, respectively.

The increase in the Company’s effective tax rate from the prior comparative period is primarily due to an increase in non-deductible interest expense in the United States and higher U.S.

tax on foreign earnings.

This was partially offset by lower tax expense due to a change in the mix of earnings among tax jurisdictions.

The effective tax rates were (24.4)% and 36.0% for the nine months ended June 30, 2024 and 2023, respectively.

The decrease in the Company’s effective tax rate from the prior comparative period is attributable to lower withholding taxes on undistributed foreign earnings which reflects a tax benefit of approximately $18.8 million related to Swiss withholding taxes from prior years.

Also contributing to the decrease was the recognition of a tax benefit of approximately $17.1 million for the establishment of a deferred tax asset as a result of a higher Swiss cantonal tax rate that contributed to an increased tax basis that is amortizable for income tax purposes over a period of seven years.

The decrease in the effective tax rate was also impacted by lower tax expense due to a change in the mix of earnings among tax jurisdictions.

This was partially offset by an increase in non-deductible interest expense in the U.S.

Other income (expense), net

Other income (expense), net, was $(1.5) million and $(3.5) million for the three months ended December 31, 2024 and 2023, respectively.

The costs incurred for the three month period ended December 31, 2024 are primarily attributed to unfavorable impacts from foreign exchange.

The costs incurred for the three month period ended December 31, 2023, are primarily attributed to amounts due to BD for income taxes payable incurred in deferred jurisdictions where BD is considered the primary obligor.

We do not expect to incur any additional amounts where BD is considered the primary obligor in the current fiscal year.

Income tax (benefit)

The effective tax rates were 100.0% and (40.6)% for the three months ended December 31, 2024 and 2023, respectively.

The increase in the Company’s effective tax rate from the prior comparative period is primarily due to the absence of a tax benefit from the establishment of deferred tax assets related to tax law changes in Switzerland, as well as a decrease in earnings.

LIQUIDITY AND CAPITAL RESOURCES

We believe that our cash and our equivalents and cash from operations, together with our borrowing capacity under our revolving credit facility, will provide sufficient financial flexibility to fund seasonal and other working capital requirements, capital expenditures, debt service requirements and other obligations, cash dividends on common shares, share repurchases and additional growth opportunities for the foreseeable future.

We believe that our cash and our cash equivalents and cash from operations, together with our borrowing capacity under our Revolving Credit Facility, will provide sufficient financial flexibility to fund seasonal and other working capital requirements, capital expenditures, debt service requirements and other obligations, cash dividends on common shares and additional growth opportunities for the foreseeable future.

However, should it become necessary, we believe that our credit profile should provide us with access to additional financing in order to fund normal business operations, make interest payments, fund growth opportunities and satisfy upcoming debt maturities.

The following is a summary of Embecta's total debt outstanding as of June 30, 2024:

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

Term Loan $ 868.9

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

Certain measures relating to our total debt outstanding as of June 30, 2024 were as follows:

Certain measures relating to our total debt outstanding as of December 31, 2024 were as follows:

Total debt $ 1,544.2

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In addition, the credit agreement contains covenants that limit, among other things, our ability to prepay, redeem or repurchase our 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.

As of June 30, 2024, we were in compliance with all of such covenants.

The credit agreement and the senior secured are secured by substantially all assets of Embecta and each subsidiary guarantor, subject to certain exceptions.

As of December 31, 2024, we were in compliance with all of such covenants.

The credit agreement and the senior secured notes are secured by substantially all assets of Embecta and each subsidiary guarantor, subject to certain exceptions.

During the first quarter of fiscal year 2025 , the Company paid an aggregate principal amount of approximately $32.4 million on the Term Loan, of which $30.0 million was discretionary.

Debt extinguishment charges as a result of this discretionary prepayment were not material to the Company's Condensed Consolidated Statements of Income.

We may, from time to time, seek to retire or repurchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchase, or privately negotiated transactions, or otherwise may redeem some or all of our debt pursuant to its terms.

Such repurchases or exchanges, if any, will depend upon various factors existing at the time, including prevailing market conditions, our liquidity requirements, contractual restrictions and other factors , and there can be no assurance as to which, if any, of these alternatives, or combination thereof, we may choose to pursue in the future.

For additional information related to the Company's debt related activities, refer to Note 12 within the Notes to Condensed Consolidated Financial Statements within this Form 10-Q.

Maturities of our finance lease and operating lease liabilities as of June 30, 2024 by fiscal year are as follows:

Maturities of our finance lease and operating lease liabilities as of December 31, 2024 by fiscal year are as follows:

Finance Lease Operating Leases Total

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

Cash and equivalents and restricted cash were $281.8 million as of June 30, 2024 as compared to $326.5 million as of September 30, 2023.

The primary sources and uses of cash that contributed to the $44.7 million decrease were:

Cash and equivalents and restricted cash were $216.7 million as of December 31, 2024 as compared to $274.2 million as of September 30, 2024.

The primary uses of cash that contributed to the $57.5 million decrease were:

September 30, 2024 Cash and equivalents and restricted cash balance $ 274.2

Cash provided by operating activities 9.1

Cash used for operating activities (5.3)

Cash used for investing activities (1.5)

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Effect of exchange rate changes on cash and equivalents and restricted cash (5.5)

June 30, 2024 Cash and equivalents and restricted cash balance $ 281.8

Net cash provided by operating activities was primarily attributable to:

December 31, 2024 Cash and equivalents and restricted cash balance $ 216.7

Net cash used for operating activities was primarily attributable to:

Net Income $ —

Non-cash adjustments related to depreciation and amortization, stock-based compensation, and deferred income taxes 12.5

Non-cash adjustments related to depreciation and amortization, impairment of property, plant and equipment, stock-based compensation, and deferred income taxes 35.6

Change in accounts payable and accrued expenses

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Change in other assets and liabilities, net

Net cash provided by operating activities $ 9.1

The change in accounts payable and accrued expenses is primarily due to timing attributable to payments to vendors during the nine month period ending June 30, 2024.

As a result of the implementation of certain Business Continuity Processes, including our ERP system that went live in November 2023 for our North America business operations and in March 2024 for our EMEA and Greater Asia business operations as well as the expiration and termination of the Factoring Agreements between Embecta and BD, we are now responsible for the collection of any outstanding trade receivables in those respective regions.

The increase in trade receivables is a direct result of this impact, and we expect to convert these outstanding trade receivables into cash in line with contractual customer payment terms.

The change in inventories is driven by actions taken to increase raw material purchases and finished goods in the current year in anticipation of our ERP system and other Business Continuity Processes that went live during fiscal 2024.

We expect inventory levels to decrease during the remainder of fiscal 2024.

The change in amounts due from/due to Becton, Dickinson and Company primarily relates to the expiration and termination of the Factoring Agreement between Embecta and BD as we are now responsible for the collection of any outstanding trade receivables on a global basis.

The change in prepaid expenses and other are primarily driven by a reduction in payments to BD for future payments made to third parties on our behalf as a result of our implementation of certain Business Continuity Processes, including our ERP system, that went live in fiscal 2024.

The change in income and other net taxes payable was primarily due to the timing of required tax payments.

The change in other assets and liabilities, net is primarily due to costs capitalized during fiscal 2024 associated with the implementation of our ERP system.

Net cash used for operating activities $ (5.3)

The change in accounts payable and accrued expenses is primarily attributed to timing of payments to vendors and annual bonus payments.

The change in trade receivables is primarily attributed to the timing of sales.

The change in inventories is primarily attributed to actions taken to build inventory to support the execution of our brand transition program.

The change in amounts due from/due to Becton, Dickinson and Company is attributed to the timing of payments associated with certain agreements effectuated at Separation.

The change in prepaid expenses and other is primarily attributed to payments received from BD associated with the transfer of certain assets and liabilities related to the Diabetes Care Business in certain jurisdictions that closed in the first quarter of fiscal 2025.

The change in income and other net taxes payable is primarily attributed to timing of required tax payments.

The change in other assets and liabilities, net is primarily attributed to costs capitalized attributed to cloud computing arrangements.

All other movements related to working capital were due to timing of payments and receipts of cash in the ordinary course of business.

Net cash used for investing activities was comprised of capital expenditures of $15.8 million for the nine months ended June 30, 2024 to support further expansion of our business and operations.

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

Net cash used for investing activities was comprised of capital expenditures of $1.5 million for the three months ended December 31, 2024 to support our business and operations.

Net cash used for financing activities was primarily attributable to:

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Net cash used for financing activities $ (45.2)

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

Contractual Obligations

Our contractual obligations as of June 30, 2024, which require material cash requirements in the future, consist of purchase obligations and lease obligations.

Our contractual obligations as of December 31, 2024, which require material cash requirements in the future, consist of purchase obligations and lease obligations.

Purchase obligations are enforceable and legally binding obligations for purchases of goods and services which include inventory purchase commitments.

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Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2024 Form 10-K for further details.

As of June 30, 2024, there have been no material changes to our contractual obligations outside the ordinary course of business.

As of December 31, 2024, there have been no material changes to our contractual obligations outside the ordinary course of business.

Critical Accounting Policies

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A discussion of accounting estimates considered critical because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates are disclosed in the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2024 Form 10-K.

There have been no changes to our critical accounting policies as of June 30, 2024.

There have been no changes to our critical accounting policies as of December 31, 2024.

Cautionary Statements Regarding Forward-Looking Statements

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Forward-looking statements include those containing such words as “anticipates,” “believes,” "can," “could,” “estimates,” “expects,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “outlook,” “plans,” "possible," “projects,” “seeks,” “sees,” “should,” “targets,” “will,” “would,” or other words of similar meaning.

All statements that reflect Embecta’s expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, forecasts relating to discussions of future operations and financial performance (including volume growth, pricing, sales and earnings per share growth and cash flows) and statements regarding Embecta’s strategy for growth, future product development, anticipated product and regulatory clearances, approvals, and launches, competitive position and expenditures.

All statements that reflect Embecta’s expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, forecasts relating to discussions of future operations and financial performance (including volume growth, pricing, sales and earnings per share growth and cash flows) and statements regarding Embecta’s strategy for growth, the Restructuring Plan, brand transition, future product development, anticipated product and regulatory clearances, approvals, and launches, competitive position and expenditures.

Forward-looking statements are based upon our present intent, beliefs or expectations, are not guarantees of future performance and are subject to numerous risks, uncertainties, and changes in circumstances that are difficult to predict.

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• Competitive factors that could adversely affect Embecta’s operations, including adoption of new drug therapies for treatment of diabetes, new product introductions by Embecta’s competitors, the development of new technologies, lower cost producers that create pricing pressure, and consolidation resulting in companies with greater scale and market presence than Embecta.

• The risk that Embecta is unable to replace the services, including the Business Continuity Processes, that BD currently provides to it on substantially similar terms as the terms on which BD is providing these services under the TSA, the LSA, and other transaction agreements or that BD terminates such services.

• The risk that Embecta is unable to replace the services, including the Business Continuity Processes, that BD currently provides to it on substantially similar terms as the terms on which BD is providing these services under the transaction agreements or that BD terminates such services.

• Any failure by BD to perform its obligations under the various separation agreements entered into in connection with the Separation and distribution, including the cannula supply agreement.

• Any events that adversely affect the sale or profitability of one of Embecta’s key products or the revenue delivered from sales to its key customers.

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

arrangements and relationships, and the potential adverse effects of any disruption in the availability of such items.

• Embecta’s ability to obtain clearance from the FDA of any product, to market and sell such products successfully, to anticipate the needs of people with diabetes, and future business decisions by Embecta and its competitors.

• Increases in operating costs, including fluctuations in the cost and availability of oil-based resins, other raw materials, and energy as well as certain components, used in its products, the ability to maintain favorable supplier arrangements and relationships, and the potential adverse effects of any disruption in the availability of such items.

• Embecta’s ability to obtain clearance from the U.S.

Food and Drug Administration of any product, to market and sell such products successfully, to anticipate the needs of people with diabetes, and future business decisions by Embecta and its competitors.

• Changes in reimbursement practices of governments or private payers or other cost containment measures.

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

• The adverse financial impact resulting from unfavorable changes in foreign currency exchange rates, as well as regional, national and foreign economic factors, including inflation, deflation, and fluctuations in interest rates, and their potential effect on its operating performance.

• The impact of changes in United States, federal laws and policy that could affect fiscal and tax policies, healthcare and international trade, including import and export regulation and international trade agreements.

In particular, tariffs or other trade barriers imposed by the United States or other countries could adversely impact its supply chain costs or otherwise adversely impact its results of operations.

• Any future impact of the COVID-19 pandemic or geopolitical instability on Embecta’s business, including disruptions in its operations and supply chains.

• Any future impact of pandemics or geopolitical instability on Embecta’s business, including disruptions in its operations and supply chains.

• New or changing laws and regulations affecting Embecta’s domestic and foreign operations, or changes in enforcement practices, including laws relating to healthcare, environmental protection, trade, monetary and fiscal policies, taxation (including tax reforms that could adversely impact multinational corporations) and licensing and regulatory requirements for products.

2 unchanged sentences

• The risk that dis-synergy costs, costs of restructuring transactions and other costs incurred in connection with the Separation will exceed Embecta's estimates.

• The impact of the Separation on Embecta's businesses and the risk that the Separation may be more difficult, time-consuming or costly than expected, including the impact on its resources, systems, including ERP, procedures and controls, diversion of management’s attention and the impact on relationships with customers, suppliers, employees and other business counterparties.

• The impact of the Separation on Embecta's businesses and the risk that the Separation may be more difficult, time-consuming or costly than expected, including brand transition, the impact on its resources, systems, including ERP, procedures and controls, diversion of management’s attention and the impact on relationships with customers, suppliers, employees and other business counterparties.

• The expectations related to the costs, profitability, timing and the estimated financial impact of, and charges associated with, the Restructuring Plan.

• The risk that we may not complete strategic collaborative partnerships and acquisition opportunities that enable us to accelerate our growth or strategic collaborative opportunities that give us access to innovative technologies, complementary product lines, and new markets.

• The risks associated with the material weakness identified in our internal control over financial reporting and our ability to remediate such material weakness.

There can be no assurance that the transactions or uncertainties described above will in fact be consummated or occur in the manner described or at all.

3 unchanged sentences

Any forward-looking statement speaks only as of the date on which it is made, and Embecta expressly disclaims and assumes no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

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

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 2. Management’s Discussion and Analysis