Embecta Corp. — Third Quarter Fiscal 2026 Earnings Summary

Financial Performance

• Reported revenues for the three months ended June 30, 2026, were $271.7 million, a decrease of 8.1% from $295.5 million in the prior year period; on an adjusted constant currency basis, revenue decreased 8.9%.
• Reported revenues for the nine months ended June 30, 2026, were $754.7 million, a decrease of 7.6% from $816.4 million in the prior year period; on an adjusted constant currency basis, revenue decreased 9.4%.
• U.S. revenues decreased 24.6% in the third quarter and 20.6% in the first nine months of fiscal 2026 compared to the prior year.
• International revenues increased 11.5% in the third quarter and 7.5% in the first nine months of fiscal 2026 compared to the prior year.
• Gross profit was $153.3 million (56.4% margin) for the third quarter, down from $197.1 million (66.7% margin) in the prior year; for the nine months, gross profit was $442.8 million (58.7% margin), down from $518.3 million (63.5% margin).
• Adjusted gross profit was $158.0 million (58.2% margin) for the third quarter, down from $198.6 million (67.2% margin); for the nine months, adjusted gross profit was $453.4 million (60.1% margin), down from $527.8 million (64.6% margin).
• Operating income was $48.7 million (17.9% margin) for the third quarter, down from $94.0 million (31.8% margin); for the nine months, operating income was $167.0 million (22.1% margin), down from $185.6 million (22.7% margin).
• Adjusted operating income was $69.4 million (25.5% margin) for the third quarter, down from $109.1 million (36.9% margin); for the nine months, adjusted operating income was $197.3 million (26.1% margin), down from $271.0 million (33.2% margin).
• Net income was $21.1 million ($0.36 per diluted share) for the third quarter, down from $45.5 million ($0.78 per diluted share); for the nine months, net income was $61.1 million ($1.03 per diluted share), down from $69.0 million ($1.18 per diluted share).
• Adjusted net income was $32.6 million ($0.56 per diluted share) for the third quarter, down from $65.5 million ($1.12 per diluted share); for the nine months, adjusted net income was $91.0 million ($1.53 per diluted share), down from $144.5 million ($2.46 per diluted share).
• Adjusted EBITDA was $85.7 million (31.5% margin) for the third quarter, down from $131.0 million (44.3% margin); for the nine months, adjusted EBITDA was $247.5 million (32.8% margin), down from $325.4 million (39.9% margin).
• Net cash provided by operating activities was $90.1 million for the nine months ended June 30, 2026, compared to $107.7 million in the prior year period.
• Non-GAAP free cash flow was $87.9 million for the nine months ended June 30, 2026, compared to $105.7 million in the prior year period.
• As of June 30, 2026, the Company held approximately $218.2 million in cash and equivalents and restricted cash.
• Total debt principal outstanding was $1.469 billion as of June 30, 2026, including $129.9 million drawn on the revolving credit facility.

Guidance and Future Outlook

• Reaffirmed fiscal year 2026 reported revenue guidance range of $1,015 million to $1,035 million.
• Raised full-year adjusted operating margin guidance to 23.50%–24.00%, up from the previous range of 22.25%–23.25%.
• Raised full-year adjusted earnings per diluted share guidance to $1.80–$1.90, up from the previous range of $1.55–$1.75.
• Updated fiscal year 2026 adjusted organic constant currency revenue growth guidance to a decrease of 10.2%–8.8%, compared to the previous range of a decrease of 10.2%–8.3%.
• Updated fiscal year 2026 M&A contribution guidance to 2.9%–3.4%, reflecting four and a half months of contribution from the Owen Mumford acquisition.
• Expects the launch of GLP-1 small pack format in the U.S. in fiscal fourth quarter.
• Expects market-appropriate syringe launches in certain geographies in the coming months.

Business Segments and Product Lines

• Pen needles revenue was $177.5 million for the third quarter, down 18.2% from $216.9 million in the prior year; for the nine months, pen needles revenue was $517.6 million, down 13.2% from $596.3 million.
• Syringes revenue was $36.6 million for the third quarter, up 4.3% from $35.1 million; for the nine months, syringes revenue was $93.7 million, up 1.5% from $92.3 million.
• Safety revenue was $36.7 million for the third quarter, up 5.5% from $34.8 million; for the nine months, safety revenue was $108.3 million, up 4.9% from $103.2 million.
• Other revenue (including Owen Mumford products) was $15.6 million for the third quarter, up 387.5% from $3.2 million; for the nine months, other revenue was $23.2 million, up 134.3% from $9.9 million.
• Contract manufacturing revenue was $5.3 million for the third quarter, down 3.6% from $5.5 million; for the nine months, contract manufacturing revenue was $11.9 million, down 19.0% from $14.7 million.
• Completed the acquisition of Owen Mumford Holdings Limited; integration is progressing as planned.
• Market-appropriate pen needles are progressing through regulatory review with the U.S. FDA and BSI for CE Mark certification.
• Completed brand transition in key European, Asian, and Latin American markets, expected to be substantially complete by end of calendar year 2026.
• Expanded B2B co-packaging opportunities with generic GLP-1 therapies featuring embecta pen needles launching in Canada and Brazil, following the initial launch in India.

Market and Competitive Landscape

• Revenue decreases were primarily driven by unfavorable changes in price ($20.1 million in Q3, $27.4 million in nine months) and volume ($19.9 million in Q3, $60.0 million in nine months).
• Positive foreign currency translation impact partially offset revenue declines, contributing $2.5 million in the third quarter and $14.8 million in the first nine months.
• Owen Mumford contributed $13.8 million to revenue in the third quarter and $13.8 million in the first nine months.
• The Company faces risks from competitive factors, potential trade tariffs, and changes in reimbursement practices.

Risks and Challenges

• Revenue declines were driven by significant volume and price pressures in the U.S. market.
• Risks include potential inability to replace services provided by BD, failure of BD to perform separation obligations, and adverse effects of tariffs on raw materials and products.
• Risks associated with the Owen Mumford acquisition include integration challenges and the realization of expected benefits.
• Regulatory risks include delays in product registration and license approvals during brand transitions and compliance with EU MDR and GDPR.
• Financial risks include fluctuations in foreign currency exchange rates, interest rate changes, and the risk that ongoing dis-synergy costs may exceed estimates.

Management Commentary and Tone

• CEO Devdatt Kurdikar stated that third-quarter results improved significantly on a sequential basis, with revenue increasing approximately $50 million, GAAP operating income increasing approximately $14 million, and adjusted operating income increasing approximately $21 million compared to the second quarter.
• Management attributed the sequential improvement to better performance in the U.S. and International segments and contributions from the Owen Mumford acquisition.
• Management expressed confidence in the year-to-date performance, leading to the reaffirmation of revenue guidance and the raising of adjusted operating margin and EPS guidance.
• The tone indicates a focus on strengthening the core business, expanding the product portfolio, and increasing financial flexibility.

Other Key Points

• Repaid approximately $53 million of debt during the quarter, including $3 million in Term Loan B mandatory payments and $50 million towards the revolving credit facility.
• Repurchased approximately $9 million of shares under the three-year, up to $100 million share repurchase program.
• Borrowed approximately $180 million under the Company's $500 million revolving credit facility to fund the Owen Mumford acquisition.
• Amended the credit agreement to extend the maturity date of $210 million of commitments under the revolving credit facility to December 30, 2028; the facility was reduced from $500 million to $310 million.
• Declared a quarterly cash dividend of $0.01 per share, payable on September 15, 2026, to stockholders of record on August 27, 2026.
• Total current assets were $705.1 million as of June 30, 2026, compared to $631.4 million as of September 30, 2025.
• Total liabilities were $1,878.0 million as of June 30, 2026, resulting in total equity of $(612.7) million.
• Capital expenditures were $2.2 million for the nine months ended June 30, 2026.
• Proceeds from the sale of certain intellectual property rights and long-lived assets were $10.1 million for the nine months ended June 30, 2026.