Item 1. Financial Statements
Item 1. Financial Statements.
Condensed Consolidated Statements of Income
Embecta Corp.
(Unaudited)
Three Months Ended
March 31, Six Months Ended
March 31,
2025 2024 2025 2024
Revenues $ 259.0 $ 287.2 $ 520.9 $ 564.5
Cost of products sold 94.9 101.8 199.7 193.2
Gross Profit $ 164.1 $ 185.4 $ 321.2 $ 371.3
Operating expenses:
Selling and administrative expense 79.6 92.3 160.7 182.6
Research and development expense 8.0 18.4 28.3 38.6
Other operating expenses 13.6 35.5 40.6 65.4
Total Operating Expenses $ 101.2 $ 146.2 $ 229.6 $ 286.6
Operating Income $ 62.9 $ 39.2 $ 91.6 $ 84.7
Interest expense, net ( 26.7 ) ( 27.8 ) ( 54.6 ) ( 55.5 )
Other income (expense), net ( 0.4 ) ( 1.5 ) ( 1.9 ) ( 5.0 )
Income Before Income Taxes $ 35.8 $ 9.9 $ 35.1 $ 24.2
Income tax provision (benefit) 12.3 ( 19.0 ) 11.6 ( 24.8 )
Net Income $ 23.5 $ 28.9 $ 23.5 $ 49.0
Net Income per common share:
Basic $ 0.40 $ 0.50 $ 0.40 $ 0.85
Diluted $ 0.40 $ 0.50 $ 0.40 $ 0.85
See notes to the Unaudited Condensed Consolidated Financial Statements.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Condensed Consolidated Statements of Comprehensive Income
Embecta Corp.
(Unaudited)
Three Months Ended
March 31, Six Months Ended
March 31,
2025 2024 2025 2024
Net Income $ 23.5 $ 28.9 $ 23.5 $ 49.0
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustments 11.4 ( 2.4 ) ( 15.5 ) 9.2
Other Comprehensive Income (Loss), net of tax $ 11.4 $ ( 2.4 ) $ ( 15.5 ) $ 9.2
Comprehensive Income $ 34.9 $ 26.5 $ 8.0 $ 58.2
See notes to the Unaudited Condensed Consolidated Financial Statements.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Condensed Consolidated Balance Sheets
Embecta Corp.
March 31, 2025 September 30, 2024
(Unaudited)
Assets
Current Assets
Cash and equivalents
$ 209.3 $ 267.5
Restricted cash 3.0 6.7
Trade receivables, net (net of allowance for doubtful accounts of $ 2.6 million and $ 2.8 million as of March 31, 2025 and September 30, 2024, respectively)
185.6 193.0
Inventories:
Materials 42.4 40.4
Work in process 8.8 4.8
Finished products 118.0 126.3
Total Inventories $ 169.2 $ 171.5
Amounts due from Becton, Dickinson and Company 17.0 53.8
Prepaid expenses and other 59.3 68.5
Total Current Assets $ 643.4 $ 761.0
Property, Plant and Equipment, Net 257.4 290.4
Goodwill and Intangible Assets
23.1 23.7
Deferred Income Taxes and Other Assets 196.3 210.2
Total Assets $ 1,120.2 $ 1,285.3
Liabilities and Equity
Current Liabilities
Accounts payable $ 58.8 $ 91.0
Accrued expenses 123.1 134.2
Amounts due to Becton, Dickinson and Company 20.7 42.5
Salaries, wages and related items 43.8 66.7
Current debt obligations 9.5 9.5
Current finance lease liabilities 3.4 3.4
Income taxes — 26.7
Total Current Liabilities $ 259.3 $ 374.0
Deferred Income Taxes and Other Liabilities 58.5 54.1
Long-Term Debt 1,509.1 1,565.3
Non Current Finance Lease Liabilities 29.5 30.2
Contingencies (Note 6)
Embecta Corp. Equity
Common stock, $ 0.01 par value
Authorized - 250,000,000
Issued and outstanding - 58,327,015 as of March 31, 2025 and 57,707,285 as of September 30, 2024
$ 0.6 $ 0.6
Additional paid-in capital 65.0 52.5
Accumulated deficit ( 493.5 ) ( 498.6 )
Accumulated other comprehensive loss ( 308.3 ) ( 292.8 )
Total Equity $ ( 736.2 ) $ ( 738.3 )
Total Liabilities and Equity $ 1,120.2 $ 1,285.3
See notes to the Unaudited Condensed Consolidated Financial Statements.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Condensed Consolidated Statements of Equity
Embecta Corp.
(Unaudited)
Common Stock
Shares Par Value Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive (Loss) Income Total
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 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 March 31, 2024 57,661,433 $ 0.6 $ 39.7 $ ( 510.0 ) $ ( 299.9 ) $ ( 769.6 )
Balance at January 1, 2025 58,131,759 $ 0.6 $ 58.2 $ ( 507.9 ) $ ( 319.7 ) $ ( 768.8 )
Net Income — — — 23.5 — 23.5
Other comprehensive income, net of taxes — — — — 11.4 11.4
Stock-based compensation plans — — 7.3 — — 7.3
Dividends and dividend equivalents declared ($ 0.15 per share)
— — 0.4 ( 9.1 ) — ( 8.7 )
Issuance of shares related to stock-based compensation plans 195,256 — ( 0.9 ) — — ( 0.9 )
Balance at March 31, 2025 58,327,015 $ 0.6 $ 65.0 $ ( 493.5 ) $ ( 308.3 ) $ ( 736.2 )
See notes to the Unaudited Condensed Consolidated Financial Statements.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Common Stock
Shares Par Value Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive (Loss) Income Total
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
Stock-based compensation plans — — 13.8 — — 13.8
Dividends and dividend equivalents declared ($ 0.30 per share)
— — 0.7 ( 17.9 ) — ( 17.2 )
Issuance of shares related to stock-based compensation plans 328,080 — ( 2.7 ) — — ( 2.7 )
Balance at March 31, 2024 57,661,433 $ 0.6 $ 39.7 $ ( 510.0 ) $ ( 299.9 ) $ ( 769.6 )
Balance at October 1, 2024 57,707,285 $ 0.6 $ 52.5 $ ( 498.6 ) $ ( 292.8 ) $ ( 738.3 )
Net Income — — — 23.5 — 23.5
Other comprehensive (loss), net of taxes — — — — ( 15.5 ) ( 15.5 )
Stock-based compensation plans — — 16.2 — — 16.2
Dividends and dividend equivalents declared ($ 0.30 per share)
— — 0.9 ( 18.4 ) — ( 17.5 )
Issuance of shares related to stock-based compensation plans 619,730 — ( 4.6 ) — — ( 4.6 )
Balance at March 31, 2025 58,327,015 $ 0.6 $ 65.0 $ ( 493.5 ) $ ( 308.3 ) $ ( 736.2 )
See notes to the Unaudited Condensed Consolidated Financial Statements.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Condensed Consolidated Statements of Cash Flows
Embecta Corp.
(Unaudited)
Six Months Ended
March 31,
2025 2024
Operating Activities
Net Income $ 23.5 $ 49.0
Adjustments to net income to derive net cash provided by operating activities:
Depreciation and amortization 18.4 17.8
Amortization of debt issuance costs 4.1 3.2
Impairment of property, plant and equipment 10.4 —
Amortization of cloud computing arrangements
5.2 1.6
Stock-based compensation 16.2 13.8
Deferred income taxes 5.6 ( 39.6 )
Change in operating assets and liabilities:
Trade receivables, net 3.7 ( 106.7 )
Inventories ( 2.0 ) 2.0
Due from/due to Becton, Dickinson and Company 15.3 64.3
Prepaid expenses and other 13.5 36.5
Accounts payable, accrued expenses and other current liabilities ( 60.5 ) 0.4
Income and other net taxes payable ( 26.8 ) ( 7.0 )
Other assets and liabilities, net ( 0.1 ) ( 24.1 )
Net cash provided by operating activities $ 26.5 $ 11.2
Investing Activities
Capital expenditures $ ( 1.6 ) $ ( 6.1 )
Net cash used for investing activities $ ( 1.6 ) $ ( 6.1 )
Financing Activities
Payments on long-term debt $ ( 59.8 ) $ ( 4.8 )
Payments related to tax withholding for stock-based compensation ( 4.6 ) ( 2.7 )
Payments on finance lease ( 0.6 ) ( 0.6 )
Dividend payments ( 17.5 ) ( 17.2 )
Net cash used for financing activities $ ( 82.5 ) $ ( 25.3 )
Effect of exchange rate changes on cash and equivalents and restricted cash
( 4.3 ) 0.2
Net Change in Cash and equivalents and restricted cash
$ ( 61.9 ) $ ( 20.0 )
Opening Cash and equivalents and restricted cash
274.2 326.5
Closing Cash and equivalents and restricted cash
$ 212.3 $ 306.5
See notes to the Unaudited Condensed Consolidated Financial Statements.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Notes to Unaudited Condensed Consolidated Financial Statements
Embecta Corp.
Note 1 — Background
Embecta Corp. ("Embecta" or the "Company") is a leading global medical device company focused on providing solutions to improve the health and well-being of people living with diabetes. The Company has a broad portfolio of marketed products, including a variety of pen needles, syringes and safety devices. The Company primarily sells products 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.
Note 2 — Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and disclosures required by GAAP for complete consolidated financial statements are not included herein. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. In the Company's opinion, all adjustments necessary for a fair statement of these interim statements have been included and are of a normal and recurring nature. All intercompany transactions and accounts within Embecta have been eliminated. These interim statements should be read in conjunction with the audited financial statements and notes thereto included in Embecta's Annual Report on Form 10-K for the year ended September 30, 2024, filed with the Securities and Exchange Commission on December 11, 2024 (the “2024 Form 10-K”).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates or assumptions affect reported assets, liabilities, revenues and expenses, depreciable and amortizable lives, sales returns and allowances, rebate accruals, inventory reserves and taxes on income as reflected in the Condensed Consolidated Financial Statements. Actual results could differ from these estimates.
The following provides updates to the Company's "Summary of Significant Accounting Policies" as disclosed in the 2024 Form 10-K.
Restructuring Costs
The Company records liabilities for costs associated with exit or disposal activities in the period in which the liability is incurred. In accordance with existing benefit arrangements, future employee termination costs to be incurred in conjunction with involuntary separations are accrued when such separations are probable and estimable. When accruing these costs, the Company will recognize the amount that is the best estimate. Costs for one-time termination benefits are recognized at the date the employee is notified, unless the employee is required to render services beyond a minimum retention period, in which case the benefits are expensed ratably over the service period. Liabilities for other costs associated with a restructuring activity are measured at fair value and are recognized when the liability is incurred. Other costs primarily consist of contract termination fees and other costs related to restructuring activities and are expensed when incurred. In connection with exit and disposal activities, the Company also assesses the recoverability of long-lived assets employed in the business. Additional disclosures regarding the Company’s accounting for restructuring costs are provided in Note 4.
Recently Adopted Accounting Standards
There were no new material accounting standards adopted in the second quarter of fiscal year 2025.
Recently Issued Accounting Standards Not Yet Adopted
In November 2023, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which modifies the disclosure and presentation requirements of reportable segments. This update is effective for the Company beginning with its fiscal year 2025 reporting and for interim reporting beginning with its fiscal year 2026. While this accounting standard will increase disclosures, it will not have a material impact on the Company’s Consolidated Financial Statement results.
In December 2023, the FASB issued ASU 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 the Company beginning with its fiscal year 2026 reporting. While this accounting standard will increase disclosures, it will not have a material impact on the Company’s Consolidated Financial Statement results.
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40), to improve disclosures about an entity's expenses including more detailed information about the components of expenses in
Dollar amounts are in millions except per share amounts or as otherwise specified.
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commonly presented expense captions. This update is effective for the Company beginning with its fiscal year 2028 reporting and for interim reporting beginning with its fiscal year 2029. While this accounting standard will increase disclosures, it is not expected to have a material impact on the Company’s Consolidated Financial Statement results.
Note 3 — Third Party Arrangements and Related Party Disclosures
On April 1, 2022, Embecta and Becton, Dickinson and Company ("BD") entered into a Separation and Distribution Agreement (the "Separation and Distribution Agreement"). 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 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. In addition, the Company entered into a series of agreements with BD that govern aspects of Embecta's relationship with BD following the Separation which 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. Certain of these agreements have expired or terminated as disclosed in the 2024 Form 10-K.
For details on the rights and responsibilities of the parties under these agreements refer to Note 4 to the Consolidated Financial Statements in the 2024 Form 10-K.
The amounts due from BD under the above agreements were $ 17.0 million and $ 7.5 million at March 31, 2025 and are included in Amounts due from Becton, Dickinson and Company and Trade receivables, net , respectively. The amounts due to BD under these agreements were $ 20.7 million and $ 4.3 million at March 31, 2025 and are included in Amounts due to Becton, Dickinson and Company and Accounts payable , respectively.
The closing of the transfers of certain assets and liabilities related to the Diabetes Care Business in certain jurisdictions, including India, as contemplated by the Separation and Distribution Agreement did not occur at Separation. The transfer of the relevant local assets and liabilities in India are expected to close at a future date. As of March 31, 2025, the amounts related to certain assets and liabilities in these jurisdictions are not material to the Company’s Condensed Consolidated Financial Statements.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Note 4 — Business Restructuring Charges
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 the Company's patch pump program. As a result, the Company incurred organizational restructuring plan (the "Patch Pump Restructuring Plan") costs during the three and six months ended March 31, 2025. This Patch Pump Restructuring Plan is substantially complete as of March 31, 2025, with the cumulative pretax costs to be incurred by the Company to implement the Patch Pump Restructuring Plan estimated to be $ 30.0 million to $ 40.0 million. 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.
During the second quarter of fiscal year 2025, the Company initiated a restructuring plan (the "2025 Restructuring Plan") to streamline the organization and optimize resources. As a result, the Company incurred organizational restructuring plan costs during the three and six months ended March 31, 2025. The Company expects these restructuring actions to be substantially completed by the end of fiscal year 2025, with the cumulative pretax costs to be incurred by the Company to implement the 2025 Restructuring Plan estimated to be $ 4.0 million to $ 5.0 million.
The following table summarizes the charges related to the restructuring programs by type of cost for the periods ended:
Three months ended March 31, 2025 Six months ended March 31, 2025
Employee Termination Non-Employee Related Total Employee Termination Non-Employee Related Total
Cost of products sold $ 0.1 $ — $ 0.1 $ 0.3 $ 6.1 $ 6.4
Selling and administrative expense 0.4 — 0.4 0.6 — 0.6
Research and development expense 4.3 — 4.3 6.6 4.3 10.9
Other operating expenses 5.3 ( 0.6 ) 4.7 14.2 4.7 18.9
$ 10.1 $ ( 0.6 ) $ 9.5 $ 21.7 $ 15.1 $ 36.8
Employee termination costs are associated with actual headcount reductions, including involuntary headcount reductions which were probable and could be reasonably estimated.
Non-employee related costs are associated with termination of contracts and long-lived asset impairments which are discussed further in Note 15 and Note 16.
The following table summarizes the charges and spending relating to restructuring program activities for the six months ended March 31, 2025:
Employee Termination Non-Employee Related Total
Balance at September 30, 2024 $ — $ — $ —
Charged to expense 21.7 15.1 36.8
Cash payments ( 13.1 ) ( 3.6 ) ( 16.7 )
Non-cash adjustments ( 3.0 ) ( 10.4 ) ( 13.4 )
Balance at March 31, 2025 (a)
$ 5.6 $ 1.1 $ 6.7
(a) As of March 31, 2025, $ 5.6 million is recorded in Salaries, wages and related items and $ 1.1 million is recorded in Accrued expenses .
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Note 5 — Other Operating Expenses
Other operating expenses are as follows:
Three months ended March 31, Six months ended March 31,
2025 2024 2025 2024
Costs related to the Separation $ 6.2 $ 32.6 $ 16.6 $ 59.0
Amortization of cloud computing arrangements
2.7 1.2 5.2 1.6
Costs associated with the discontinued patch pump program 1.0 — 15.3 —
Business optimization and severance related costs 3.6 1.0 3.6 2.9
Other 0.1 0.7 ( 0.1 ) 1.9
Total $ 13.6 $ 35.5 $ 40.6 $ 65.4
In connection with the Separation, the Company incurred separation and stand-up costs. The costs incurred primarily consist of costs associated with accounting, auditing, legal services, marketing, supply chain, employee retention, brand transition, and certain other costs to establish 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 plan ("ERP") system (“Business Continuity Processes”) and stand-alone functions to assist with the transition to being a stand-alone entity.
For both the three and six months ended March 31, 2025 and 2024, the Company recognized costs associated with the amortization of cloud computing arrangements which is further discussed in Note 11.
For the three and six months ended March 31, 2025, the Company recognized costs associated with the discontinuation of the patch pump program which is further discussed in Note 4.
For both the three and six months ended March 31, 2025 and 2024, the Company incurred restructuring, business optimization, and severance related costs associated with standing up and optimizing the organization.
Note 6 — Contingencies
The Company was not a party to any material legal proceedings at March 31, 2025 or September 30, 2024, 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 revenue have not changed from those described in the 2024 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. End-users of the Company’s products include healthcare institutions, physicians, life science researchers, clinical laboratories, the pharmaceutical industry, and the general public.
Measurement of Revenues
Payment terms extended to the Company’s customers are based upon commercially reasonable terms for the markets in which the Company’s products are sold. Because the Company generally expects to receive payment within one year or less from when control of a product is transferred to the customer, the Company does not generally adjust its revenues for the effects of a financing component. The Company’s allowance for doubtful accounts reflects the current estimate of credit losses expected to be incurred over the life of its trade receivables. Such estimated credit losses are determined based on historical loss experiences, customer specific credit risk, and reasonable and supportable forward-looking information, such as country or regional risks that are not captured in the historical loss information. Amounts are written off against the allowances for doubtful accounts when the Company determines that a customer account is uncollectible. The allowance for doubtful accounts for trade receivables is not material to the Company’s Condensed Consolidated Financial Statements.
The Company’s gross revenues are subject to a variety of gross-to-net deductions which are recorded in the same period that the underlying revenues are recognized. Such variable consideration includes rebates, sales discounts, and sales returns. Because these deductions represent estimates of the related obligations, judgment is required when determining the impact of these revenue deductions on gross revenues for a reporting period. Rebates provided by the Company are based upon prices determined under the Company’s agreements primarily with its end-user customers. Additional factors considered in the estimate of the Company’s rebate liability include the quantification of inventory that is either in stock at
Dollar amounts are in millions except per share amounts or as otherwise specified.
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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 March 31, 2025 and September 30, 2024 was $ 128.4 million and $ 149.6 million, respectively. Sales deductions recorded as a reduction of gross revenues for the three months ended March 31, 2025 and 2024 were $ 143.2 million and $ 138.5 million, respectively. Sales deductions recorded as a reduction of gross revenues for the six months ended March 31, 2025 and 2024 were $ 293.3 million and $ 265.2 million, respectively.
Disaggregation of Revenues
Disaggregation of revenue by geographic region and product line is provided within Note 8.
Contract Assets and Liabilities
The Company does not have contract liabilities. 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 March 31, 2025 and September 30, 2024.
Note 8 — Segment and Geographical Data
Operating segments are identified as components of an enterprise in which discrete financial information is available for evaluation by the chief operating decision-maker (“CODM”) in making decisions regarding assessing business performance and allocating resources and capital. Management has concluded that the Company operates in one segment based upon the information used by the CODM in evaluating the performance of the Company’s business and allocating resources and capital.
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. 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. In certain markets within Europe, the Company has dedicated sales representatives and in certain regions of the Middle East and Africa, the Company has distribution agreements. In Asia, the Company has distribution agreements, and in China the Company relies on its own commercial team to support sales execution. In Latin America, the Company maintains distribution agreements and direct sales representatives.
The Company disaggregates its revenue by geography and product line as management believes these categories best depict how the nature, amount, and timing of revenues and cash flows are affected by economic factors.
Revenues by geographic region are as follows:
Three months ended March 31, Six months ended March 31,
2025 2024 2025 2024
United States $ 135.2 $ 147.6 $ 276.9 $ 296.2
International (1)
123.8 139.6 244.0 268.3
Total $ 259.0 $ 287.2 $ 520.9 $ 564.5
(1) For the three and six months ended March 31, 2025 and 2024, no individual country outside of the United States generated net revenues that represented more than 10.0% of total revenues.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Revenues by product line are as follows:
Three months ended March 31, Six months ended March 31,
2025 2024 2025 2024
Pen Needles $ 188.3 $ 218.2 $ 379.4 $ 428.0
Syringes 28.8 30.0 57.2 60.8
Safety 34.2 33.3 68.4 64.1
Other (2)
3.3 3.1 6.7 7.1
Contract Manufacturing 4.4 2.6 9.2 4.5
Total $ 259.0 $ 287.2 $ 520.9 $ 564.5
(2) Other includes product sales for swabs and other accessories.
Note 9 — Stock-Based Compensation
Stock-Based Compensation Expense
Total stock-based compensation expense for the three and six months ended March 31, 2025 and 2024 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,
2025 2024 2025 2024
Cost of products sold $ 0.6 $ 1.1 $ 1.2 $ 2.0
Selling and administrative expense 4.7 4.9 12.1 10.8
Research and development expense 0.1 0.5 0.2 1.1
Other operating expense 1.9 — 2.8 —
Total Stock-Based Compensation Expense $ 7.3 $ 6.5 $ 16.3 $ 13.9
Tax benefit associated with stock-based compensation costs recognized $ 1.0 $ 0.5 $ 2.0 $ 1.2
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, 2025 and 2024:
Three months ended March 31, Six Months Ended March 31,
2025 2024 2025 2024
Equity Awards $ 7.3 $ 6.5 $ 16.2 $ 13.8
Liability Awards — — 0.1 0.1
Total $ 7.3 $ 6.5 $ 16.3 $ 13.9
The following table summarizes the Company's total stock-based compensation expense by award type for the three and six months ended March 31, 2025 and 2024:
Three months ended March 31, Six Months Ended March 31,
2025 2024 2025 2024
Time-Vested Restricted Stock Units (TVUs)
$ 6.2 $ 5.2 $ 11.8 $ 10.6
Performance-Based Restricted Stock Units (PSUs)
0.4 0.4 3.3 1.3
Stock Appreciation Rights (SARs)
0.7 0.9 1.2 2.0
Total $ 7.3 $ 6.5 $ 16.3 $ 13.9
Time Vested Restricted Stock Units ("TVUs")
During the six months ended March 31, 2025 , Embecta granted 1,541,980 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
Dollar amounts are in millions except per share amounts or as otherwise specified.
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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.
A summary of TVUs outstanding as of March 31, 2025 and changes during the six months ended March 31, 2025 are as follows:
TVUs (in thousands) Weighted Average Grant Date Fair Value
Nonvested at October 1 1,918.0 $ 21.34
Granted* 1,542.0 18.55
Distributed** ( 865.5 ) 21.63
Forfeited, canceled or expired ( 222.2 ) 19.08
Nonvested at March 31 2,372.3 $ 19.60
Expected to vest at March 31 2,256.2 $ 19.66
*Includes accumulated nonvested dividend equivalents
**The TVUs 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 six months ended March 31, 2025 is $ 18.55 and the total fair value of TVUs vested during the six months ended March 31, 2025 is $ 18.8 million.
At March 31, 2025, the weighted average remaining vesting term of TVUs is 1.9 years.
Performance Based Restricted Stock Units ("PSUs")
During the six months ended March 31, 2025 , Embecta awarded 538,031 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. The Company has determined that the service inception date precedes the grant date for these awards as (a) the awards were authorized prior to establishing an accounting grant date, (b) the recipients began providing services prior to the grant date, and (c) there are performance conditions that, if not met by the accounting grant date, will result in the forfeiture of the awards. 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 March 31, 2025 , there were 975,546 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.
A summary of PSUs outstanding as of March 31, 2025 and changes during the six months ended March 31, 2025 are as follows:
Stock Units (in thousands) Weighted Average Grant Date Fair Value
Nonvested at October 1 56.7 $ 30.24
Granted* 216.1 18.17
Distributed
( 37.4 ) 18.70
Forfeited, canceled or expired ( 6.2 ) 18.96
Nonvested at March 31 229.2 $ 21.39
Expected to vest at March 31 218.1 $ 21.38
*Includes accumulated nonvested dividend equivalents
Dollar amounts are in millions except per share amounts or as otherwise specified.
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At March 31, 2025, the weighted average remaining vesting term of PSUs is 0.6 years.
Stock Appreciation Rights
A summary of stock appreciation rights ("SARs") outstanding as of March 31, 2025 and changes during the six months ended March 31, 2025 are as follows:
SARs (in thousands) Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value
Balance at October 1 1,760.4 $ 29.11
Exercised* ( 3.4 ) 13.30
Forfeited, canceled or expired ( 159.6 ) 29.42
Balance at March 31 1,597.4 $ 29.12 6.2 $ —
Vested and expected to vest at March 31 1,563.1 29.08 6.2 $ —
Exercisable at March 31 973.2 $ 28.09 5.8 $ —
*The amounts exercised include shares withheld for taxes that are not formally issued to the market.
3,400 SARs w ere exercised during the six months ended March 31, 2025. The intrinsic val ue and grant date fair value of SARs exercised was immaterial.
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 March 31, 2025, is approximately $ 39.6 million which is expected to be recognized over a weighted-average remaining life of approximately 2.1 years. At March 31, 2025, 3.1 million shares were authorized for future grants under the Company's 2022 Employee and Director Equity Based Compensation Plan, as amended.
Note 10 — Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets consisted of:
March 31, 2025 September 30, 2024
Amortized intangible assets
Patents – gross $ 10.8 $ 10.8
Less: accumulated amortization ( 5.4 ) ( 5.1 )
Patents – net $ 5.4 $ 5.7
Customer Relationships and Other – gross $ 5.2 $ 5.2
Less: accumulated amortization ( 3.0 ) ( 2.8 )
Customer Relationships and Other – net $ 2.2 $ 2.4
Total amortized intangible assets $ 7.6 $ 8.1
Goodwill 15.5 15.6
Total Goodwill and Other Intangible Assets $ 23.1 $ 23.7
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Note 11 — Cloud Computing Arrangements
The Company capitalizes costs associated with the development of cloud computing arrangements in a manner consistent with internally developed software. 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, 2025 September 30, 2024
Short-term portion
$ 10.5 $ 10.2
Long-term portion
61.1 60.6
Total Capitalized implementation costs
$ 71.6 $ 70.8
Less: accumulated amortization ( 11.6 ) ( 6.3 )
Total Capitalized implementation costs, net
$ 60.0 $ 64.5
Costs amortized during the three and six months ended March 31, 2025 and 2024 are included in Other operating expenses and were as follows:
Three months ended March 31, Six months ended March 31,
2025 2024 2025 2024
Amortization of cloud computing arrangements
2.7 1.2 5.2 1.6
As of March 31, 2025, cloud computing arrangement assets in-service have remaining useful lives which range from approximately two to eight years .
Note 12 — Long-Term Debt
Credit Agreement
On March 31, 2022, Embecta entered into a credit agreement (the “Credit Agreement”), providing for:
• a Term Loan B Facility (the "Term Loan") in the amount of $ 950.0 million, with a seven -year term that matures in March 2029. The interest rate is 300 basis points over the secured overnight financing rate (“SOFR”), with a 0.50 % SOFR floor. The Term Loan was issued at a discount of 0.50 %. Principal and interest payments on the Term Loan commenced on June 30, 2022. Such quarterly principal payments are calculated as 0.25 % of the initial principal amount, with the remaining balance payable upon maturity; and
• a Revolving Credit Facility (the "Revolving Credit Facility") in an aggregate principal amount of up to $ 500.0 million, with a five -year term that matures in 2027. Borrowings under the Revolving Credit Facility bear interest, at Embecta’s option, at an annual rate equal to (a) in the case of loans denominated in United States dollars (i) the SOFR or (ii) the alternate base rate or (b) in the case of loans denominated in Euros, the EURIBOR rate, in each case plus an applicable margin specified in the credit agreement. A commitment fee applies to the unused portion of the Revolving Credit Facility, equal to 0.25 % per annum. As of March 31, 2025, 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. As of March 31, 2025, 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.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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The following is a summary of Embecta's total debt outstanding as of March 31, 2025:
Term Loan due March 2029 $ 841.5
5.00 % Notes due February 2030
500.0
6.75 % Notes due February 2030
200.0
Total principal debt issued $ 1,541.5
Less: current debt obligations ( 9.5 )
Less: debt issuance costs and discounts ( 22.9 )
Long-term debt $ 1,509.1
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. During the six months ended March 31, 2025, the Company recorded approximately $ 4.1 million of amortization on deferred debt issuance costs and discounts.
During the six months ended March 31, 2025 , the Company made interest payments of $ 52.5 million on debt outstanding. The weighted-average interest rate on total borrowings as of March 31, 2025 is 6.5 %.
During the six months ended March 31, 2025, the Company paid an aggregate principal amount of approximately $ 59.8 million on the Term Loan, of which $ 55.0 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.
The schedule of principal payments required on long-term debt for the next five fiscal years and thereafter is as follows:
2025 $ 4.8
2026 9.5
2027 9.5
2028 9.5
2029 833.3
Thereafter 674.9
The estimated fair value of long-term debt (including current portion) at March 31, 2025 was $ 1,477.4 million compared with a carrying value (which includes a reduction for unamortized debt issuance costs and discounts) of $ 1,518.6 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 13 — Earnings per Share
The calculation of earnings per basic and diluted common share for the three and six months ended March 31, 2025 and 2024 was as follows:
Three Months Ended
March 31, Six Months Ended
March 31,
($ in millions and shares in thousands, except per share amounts) 2025 2024 2025 2024
Net Income $ 23.5 $ 28.9 $ 23.5 $ 49.0
Basic weighted average number of shares outstanding 58,290 57,687 58,119 57,580
Stock awards and equity units (share equivalent) 257 120 537 396
Diluted weighted average shares outstanding 58,547 57,807 58,656 57,976
Earnings per common share - Basic $ 0.40 $ 0.50 $ 0.40 $ 0.85
Earnings per common share - Diluted $ 0.40 $ 0.50 $ 0.40 $ 0.85
Antidilutive Shares (millions) 3.9 4.2 2.5 2.8
Earnings per diluted share is computed by giving effect to all potentially dilutive stock awards that are outstanding. 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.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Note 14 — Income Taxes
The Company is subject to income tax in the various jurisdictions in which it operates. 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 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 34.4 % and ( 191.9 )% for the three months ended March 31, 2025 and 2024, respectively. The increase in the Company's effective tax rate compared to the prior period is primarily due to the absence of non-recurring tax benefits recognized in the prior period related to withholding taxes on undistributed foreign earnings and tax reserves, partially offset by favorable tax impacts primarily resulting from overall higher earnings reflected in the current period.
The effective tax rates were 33.0 % and ( 102.5 )% for the six months ended March 31, 2025 and 2024, respectively. The increase in the Company's effective tax rate compared to the prior period is primarily due to the absence of non-recurring tax benefits recognized in the prior period related to withholding taxes on undistributed foreign earnings, Swiss tax law changes and tax reserves, partially offset by favorable tax impacts primarily resulting from overall higher earnings reflected in the current period.
Note 15 — Financial Instruments and Fair Value Measurements
The following reconciles Cash and equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets as of March 31, 2025 and September 30, 2024, to the total amounts shown in the Condensed Consolidated Statements of Cash Flows:
March 31, 2025 September 30, 2024
Cash and equivalents
$ 209.3 $ 267.5
Restricted cash
3.0 6.7
Cash and equivalents and restricted cash
$ 212.3 $ 274.2
Cash and equivalents as of March 31, 2025 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 $ 1.3 million and $ 2.9 million for the three months ended March 31, 2025 and 2024, respectively, and $ 3.1 million and $ 6.3 million for the six months ended March 31, 2025 and 2024, 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
The Company has foreign currency exposures throughout Europe, Asia, Canada and Latin America. 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 March 31, 2025 and September 30, 2024:
Hedge Designation March 31, 2025 September 30, 2024
Foreign exchange contracts (a)
Undesignated $ 3.3 $ 4.5
(a) Represent hedges of transactional foreign exchange exposures resulting primarily from intercompany payables and receivables. Gains and losses on these instruments are recognized immediately in Other income (expense), net. These gains and losses are largely offset by gains and losses on the underlying hedged items, as well as the hedging costs associated with the derivative instruments. Gains and losses recognized to date on these instruments were not material to the Company's Condensed Consolidated Financial Statements.
Nonrecurring Fair Value Measurements
Non-financial assets, including property, plant and equipment as well as intangible assets, are measured at fair value when there are indicators of impairment and these assets are recorded at fair value only when an impairment is recognized. These measurements of fair value are generally based upon Level 3 inputs, including values estimated using the income approach.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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In the first half of fiscal year 2025, the Company recorded a non-cash asset impairment charge of $ 10.4 million 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. $ 6.1 million was recorded to Cost of products sold and $ 4.3 million was recorded to Research and development expense . The amount recognized was recorded to adjust the carrying amount of assets to the assets' fair values, which were estimated, based upon a market participant's perspective, using Level 3 measurements, including values estimated using the income approach.
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 March 31, 2025, and three of the Company's customers represented at least 10.0% of total gross revenues individually and, in the aggregate, represented approximately 41.4 % of total revenues for the six months ended March 31, 2025.
Two of the Company's customers represented at least 10.0% of total gross trade receivables individually and, in the aggregate, represented approximately 32.3 % as of March 31, 2025.
Substantially all of the Company’s trade receivables are due from public and private entities involved in the healthcare industry. The Company does not normally require collateral from its customers.
Note 16 — Property, Plant and Equipment
Property, Plant and Equipment, Net consisted of:
March 31, 2025 September 30, 2024
Land $ 3.0 $ 3.1
Buildings 117.4 121.7
Machinery, equipment and fixtures 566.2 607.3
Leasehold improvements 11.2 11.9
Construction in progress 56.2 35.1
$ 754.0 $ 779.1
Less: accumulated depreciation ( 496.6 ) ( 488.7 )
Total Property, Plant and Equipment, Net $ 257.4 $ 290.4
In the first half of fiscal year 2025, the Company recorded a non-cash asset impairment charge of $ 10.4 million 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. $ 6.1 million was recorded to Cost of products sold and $ 4.3 million was recorded to Research and development expense .
Note 17 — Leases
Finance Leases
The Company's finance lease assets and liabilities are attributed to its manufacturing site in Holdrege, Nebraska, which has an initial term of ten years and an option for the Company to extend the lease term for an additional period of up to five years . This lease is classified as a finance lease because the present value of the sum of the lease payments associated with the lease exceeds substantially all of the fair value of the manufacturing site.
Operating Leases
The Company's operating leases primarily relate to its real estate leases that are not classified as finance leases.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Aggregate Lease Information
The Company's leases are included in its Condensed Consolidated Balance Sheets as follows:
March 31, 2025 September 30, 2024
Finance Leases
Property, Plant, and Equipment, Net $ 29.5 $ 30.8
Total Finance Lease Assets $ 29.5 $ 30.8
Current finance lease liabilities $ 3.4 $ 3.4
Non Current Finance Lease Liabilities 29.5 30.2
Total Finance Lease Liabilities $ 32.9 $ 33.6
Weighted-average remaining lease term (years) 12.0 12.5
Weighted-average discount rate 6.8 % 6.8 %
Operating Leases
Other Assets $ 21.1 $ 22.6
Total Operating Lease Assets $ 21.1 $ 22.6
Accrued expenses $ 6.3 $ 6.0
Deferred Income Taxes and Other Liabilities 10.8 11.9
Total Operating Lease Liabilities $ 17.1 $ 17.9
Weighted-average remaining lease term (years) 6.1 6.3
Weighted-average discount rate 7.0 % 6.5 %
Supplemental cash flow information related to leases for the six months ended March 31, 2025 and 2024 were as follows:
March 31, 2025 March 31, 2024
Right of use assets obtained in exchange for lease liabilities
Operating Leases 2.2 1.5
March 31, 2025 March 31, 2024
Cash used for amounts included in the measurement of lease liabilities
Operating cash flows from Operating Leases
$ 2.9 $ 2.9
Financing cash flows from Finance Lease
0.6 0.6
Operating cash flows from Finance Lease
1.1 1.2
Maturities of the Company's finance and operating lease liabilities as of March 31, 2025 by fiscal year are as follows:
Finance Leases Operating Leases Total
2025 $ 1.9 $ 3.4 $ 5.3
2026 3.7 3.5 7.2
2027 3.8 1.9 5.7
2028 3.9 1.9 5.8
2029 3.9 1.7 5.6
Thereafter 32.3 7.3 39.6
Total lease payments $ 49.5 $ 19.7 $ 69.2
Less: amount representing interest 16.6 2.6 19.2
Present value of lease liabilities $ 32.9 $ 17.1 $ 50.0
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.