Embecta Corp. (“embecta” or the "Company") (Nasdaq: EMBC), a global
diabetes care company, today reported financial results for the
three and nine month periods ended June 30, 2024.
"During the third quarter our business performed
in alignment with our expectations. We generated strong gross,
operating and EBITDA margins even as revenue was impacted by the
expected timing of customer orders that had positively impacted our
second quarter results," said Devdatt (Dev) Kurdikar, Chief
Executive Officer of embecta. "From a year-to-date perspective, our
financial results demonstrated the continued resilience and
stability of our business."
"Additionally, I’m proud of the significant
strides we have made as an organization in advancing our strategic
priorities, including the transition to our own enterprise resource
planning (“ERP”) system, shared service capability and distribution
infrastructure, which is now complete in most regions of the world.
Furthermore, we made progress on our 510(k) application for the
open-loop patch pump program. Lastly, given the strong year-to-date
performance, coupled with our outlook for the remainder of the
year, we are once again tightening and raising our fiscal 2024
outlook for certain financial metrics."
Third Quarter Fiscal Year 2024 Financial
Highlights:
- Revenues of $272.5 million, down 4.8% on a reported basis; down
3.9% on a constant currency basis
- U.S. revenues decreased 6.7% on both a reported and constant
currency basis
- International revenues decreased 2.5% on a reported basis, and
0.6% on a constant currency basis
- Gross profit and margin of $190.1 million and 69.8%, compared
to $189.5 million and 66.2% in the prior year period
- Adjusted gross profit and margin of $190.3 million and 69.8%,
compared to $189.6 million and 66.3% in the prior year period
- Operating income and margin of $55.9 million and 20.5%,
compared to $51.3 million and 17.9% in the prior year
period
- Adjusted operating income and margin of $83.3 million and
30.6%, compared to $79.8 million and 27.9% in the prior year
period
- Net income and earnings per diluted share of $14.7 million and
$0.25, compared to $15.2 million and $0.26 in the prior year
period
- Adjusted net income and adjusted earnings per diluted share of
$43.0 million and $0.74, compared to $39.8 million and
$0.69 in the prior year period
- Adjusted EBITDA and margin of $99.2 million and 36.4%, compared
to $92.2 million and 32.2% in the prior year period
- Announced a dividend of $0.15 per share
Nine Months Ended June 30 2024 Financial
Highlights:
- Revenues of $837.0 million, down 0.2% on a reported basis; up
0.1% on a constant currency basis
- U.S. revenues decreased 2.2% on both a reported and constant
currency basis
- International revenues increased 2.0% on a reported basis, and
2.7% on a constant currency basis
- Gross profit and margin of $561.4 million and 67.1%, compared
to $568.1 million and 67.7% in the prior year period
- Adjusted gross profit and margin of $562.4 million and 67.2%,
compared to $568.6 million and 67.8% in the prior year period
- Operating income and margin of $140.6 million and 16.8%,
compared to $195.7 million and 23.3% in the prior year
period
- Adjusted operating income and margin of $235.7 million and
28.2%, compared to $266.3 million and 31.7% in the prior year
period
- Net income and earnings per diluted share of $63.7 million and
$1.10, compared to $64.4 million and $1.12 in the prior year
period
- Adjusted net income and adjusted earnings per diluted share of
$117.2 million and $2.02, compared to $138.5 million and $2.40 in
the prior year period
- Adjusted EBITDA and margin of $280.4 million and 33.5%,
compared to $299.1 million and 35.7% in the prior year period
Strategic
Highlights:
- Strengthen the base business
- Initiated a program with the objective of introducing a new
small-pack pen needle product in Germany, to address unmet needs of
growing number of customers using GLP-1
- Separate and stand-up
- Completed implementation of ERP, operationalization of shared
service capability and distribution network in China; now
approximately 93% of our global revenue is operating on our systems
and processes
- Invest for growth
- Progressed the U.S. Food and Drug Administration (“FDA”) 510(k)
premarket filing of our open-loop insulin delivery system
- Advanced the development of a type 2 closed loop insulin
delivery system utilizing embecta’s proprietary patch pump system,
which carries Breakthrough Device Designation from the FDA
- Presented embecta-sponsored abstracts at American Diabetes
Association’s 84th scientific sessions highlighting unmet need for
patch pumps with 300 unit insulin reservoir
Third Quarter Fiscal Year 2024
Results:
Revenues by geographic region are as
follows:
| |
Three months ended June 30, |
| Dollars in
millions |
|
|
|
Increase/(decrease) |
| |
|
|
|
|
|
|
As Reported |
|
Constant Currency |
| |
2024 |
|
2023 |
|
$ |
|
% |
|
% |
| United States |
$ |
143.6 |
|
$ |
153.9 |
|
$ |
(10.3 |
) |
|
(6.7 |
) % |
|
(6.7 |
)% |
|
International |
|
128.9 |
|
|
132.2 |
|
|
(3.3 |
) |
|
(2.5 |
) |
|
(0.6 |
) |
| Total |
$ |
272.5 |
|
$ |
286.1 |
|
$ |
(13.6 |
) |
|
(4.8 |
) % |
|
(3.9 |
)% |
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. 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 $24.4 million of unfavorable changes in
volume and $2.5 million associated with the negative impact of
foreign currency translation primarily due to the strengthening of
the U.S. dollar. 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.
Nine Months Ended June 30, 2024
Results:
Revenues by geographic region are as
follows:
| |
Nine months ended June 30, |
| Dollars in
millions |
|
|
|
Increase/(decrease) |
| |
|
|
|
|
|
|
As Reported |
|
|
Constant Currency |
| |
2024 |
|
2023 |
|
$ |
|
% |
|
|
% |
|
United States |
$ |
439.8 |
|
$ |
449.6 |
|
$ |
(9.8 |
) |
|
(2.2 |
)% |
|
(2.2 |
)% |
| International |
|
397.2 |
|
|
389.3 |
|
|
7.9 |
|
|
2.0 |
|
|
2.7 |
|
| Total |
$ |
837.0 |
|
$ |
838.9 |
|
$ |
(1.9 |
) |
|
(0.2 |
)% |
|
0.1 |
% |
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.
Fiscal Year 2024 Updated Financial
Guidance:For fiscal year 2024, the Company now
expects:
|
Dollars in millions, except percentages and per share
data |
|
Current |
|
Previous (1) |
| Revenues |
|
$1,111 - $1,116 |
|
$1,111 - $1,116 |
|
As Reported (%) |
|
(0.9%) - (0.4%) |
|
(0.9%) - (0.4%) |
|
Constant Currency (%) |
|
(0.5%) - 0.0% |
|
(0.5%) - 0.0% |
|
F/X (%) |
|
(0.4)% |
|
(0.4)% |
|
Contract Manufacturing |
|
$8 |
|
$5 |
| Adjusted Gross Margin (%) |
|
65.25% - 65.50% |
|
64.5% - 65.0% |
| Adjusted Operating Margin
(%) |
|
25.75% - 26.00% |
|
25.25% - 25.75% |
| Adjusted Earnings per Diluted
Share |
|
$2.30 - $2.35 |
|
$2.20 - $2.30 |
| Adjusted EBITDA Margin
(%) |
|
31.25% - 31.50% |
|
31.0% - 31.5% |
(1) Previous guidance was issued on May 9,
2024.
We are unable to present a quantitative
reconciliation of our expected adjusted gross margin, expected
adjusted operating margin, expected adjusted earnings per diluted
share, expected adjusted EBITDA and our expected adjusted EBITDA
margin as we are unable to predict with reasonable certainty, and
without unreasonable effort the impact and timing of any one-time
items. The financial impact of these one-time items is uncertain
and is dependent on various factors, including timing, and could be
material to our Condensed Consolidated Statements of Income.
Balance sheet, Liquidity and Other
Updates
As of June 30, 2024, the Company had
approximately $281.8 million in cash and equivalents and restricted
cash and $1.629 billion of debt principal outstanding, and no
amount drawn on its $500 million Revolving Credit Facility.
The Company’s Board of Directors declared a
quarterly cash dividend of $0.15 for each issued and outstanding
share of the Company’s common stock. The dividend is payable on
September 13, 2024 to stockholders of record at the close of
business on August 27, 2024.
Third Quarter Fiscal Year 2024 Earnings Conference
Call:
Management will host a conference call at 8:00
a.m. Eastern Time (ET) on August 9, 2024 to discuss the
results of the quarter, provide an update on its business, and host
a question and answer session. Those who would like to participate
may access the live webcast here, or access the teleconference
here. The live webcast can also be accessed via the company’s
website at investors.embecta.com.
A webcast replay of the call will be available
beginning at 11:00 a.m. ET on August 9, 2024, via the embecta
investor relations website and archived on the website for one
year.
|
|
|
Condensed Consolidated Statements of Income |
|
Embecta Corp. |
|
(Unaudited, in millions, except per share
data) |
| |
| |
Three Months Ended June 30, |
|
Nine Months Ended June 30, |
| |
2024 |
|
2023 |
|
2024 |
|
2023 |
| |
|
|
|
|
|
|
|
|
Revenues |
$ |
272.5 |
|
|
$ |
286.1 |
|
|
$ |
837.0 |
|
|
$ |
838.9 |
|
| Cost of products sold |
|
82.4 |
|
|
|
96.6 |
|
|
|
275.6 |
|
|
|
270.8 |
|
|
Gross Profit |
$ |
190.1 |
|
|
$ |
189.5 |
|
|
$ |
561.4 |
|
|
$ |
568.1 |
|
| Operating expenses: |
|
|
|
|
|
|
|
| Selling and administrative
expense |
|
85.7 |
|
|
|
87.6 |
|
|
|
268.3 |
|
|
|
245.6 |
|
| Research and development
expense |
|
20.4 |
|
|
|
22.6 |
|
|
|
59.0 |
|
|
|
61.6 |
|
| Other operating expenses |
|
28.1 |
|
|
|
28.0 |
|
|
|
93.5 |
|
|
|
65.2 |
|
|
Total Operating Expenses |
$ |
134.2 |
|
|
$ |
138.2 |
|
|
$ |
420.8 |
|
|
$ |
372.4 |
|
|
Operating Income |
$ |
55.9 |
|
|
$ |
51.3 |
|
|
$ |
140.6 |
|
|
$ |
195.7 |
|
| Interest expense, net |
|
(27.8 |
) |
|
|
(27.0 |
) |
|
|
(83.3 |
) |
|
|
(79.4 |
) |
| Other income (expense), net |
|
(1.1 |
) |
|
|
(4.2 |
) |
|
|
(6.1 |
) |
|
|
(15.6 |
) |
| Income Before Income Taxes |
$ |
27.0 |
|
|
$ |
20.1 |
|
|
$ |
51.2 |
|
|
$ |
100.7 |
|
| Income tax provision
(benefit) |
|
12.3 |
|
|
|
4.9 |
|
|
|
(12.5 |
) |
|
|
36.3 |
|
|
Net Income |
$ |
14.7 |
|
|
$ |
15.2 |
|
|
$ |
63.7 |
|
|
$ |
64.4 |
|
| |
|
|
|
|
|
|
|
| Net Income per common share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.25 |
|
|
$ |
0.27 |
|
|
$ |
1.11 |
|
|
$ |
1.13 |
|
|
Diluted |
$ |
0.25 |
|
|
$ |
0.26 |
|
|
$ |
1.10 |
|
|
$ |
1.12 |
|
|
Condensed Consolidated Balance Sheets |
|
Embecta Corp. |
|
(in millions, except share and per share
data) |
| |
| |
June 30, 2024 |
|
September 30, 2023 |
| |
(Unaudited) |
|
|
| Assets |
|
|
|
|
Current Assets |
|
|
|
|
Cash and equivalents |
$ |
275.1 |
|
|
$ |
326.3 |
|
|
Restricted cash |
|
6.7 |
|
|
|
0.2 |
|
|
Trade receivables, net (net of allowance for
doubtful accounts of $2.4 million and
$1.0 million as of June 30, 2024 and September 30, 2023,
respectively) |
|
171.8 |
|
|
|
16.7 |
|
|
Inventories: |
|
|
|
|
Materials |
|
38.2 |
|
|
|
32.1 |
|
|
Work in process |
|
5.8 |
|
|
|
8.1 |
|
|
Finished products |
|
141.6 |
|
|
|
111.9 |
|
|
Total Inventories |
$ |
185.6 |
|
|
$ |
152.1 |
|
|
Amounts due from Becton, Dickinson and
Company |
|
71.6 |
|
|
|
142.4 |
|
|
Prepaid expenses and other |
|
70.3 |
|
|
|
111.4 |
|
|
Total Current Assets |
$ |
781.1 |
|
|
$ |
749.1 |
|
| Property, Plant and Equipment,
Net |
|
291.2 |
|
|
|
300.2 |
|
| Goodwill and Intangible
Assets |
|
23.8 |
|
|
|
24.7 |
|
| Deferred Income Taxes and Other
Assets |
|
171.4 |
|
|
|
140.4 |
|
| Total Assets |
$ |
1,267.5 |
|
|
$ |
1,214.4 |
|
| Liabilities and
Equity |
|
|
|
|
Current Liabilities |
|
|
|
|
Accounts payable |
$ |
66.8 |
|
|
$ |
53.5 |
|
|
Accrued expenses |
|
142.2 |
|
|
|
118.1 |
|
|
Amounts due to Becton, Dickinson and
Company |
|
51.7 |
|
|
|
73.1 |
|
|
Salaries, wages and related items |
|
56.2 |
|
|
|
62.1 |
|
|
Current debt obligations |
|
9.5 |
|
|
|
9.5 |
|
|
Current finance lease liabilities |
|
3.4 |
|
|
|
3.6 |
|
|
Income taxes |
|
40.9 |
|
|
|
33.6 |
|
|
Total Current Liabilities |
$ |
370.7 |
|
|
$ |
353.5 |
|
| Deferred Income Taxes and Other
Liabilities |
|
39.2 |
|
|
|
57.2 |
|
| Long-Term Debt |
|
1,590.8 |
|
|
|
1,593.9 |
|
| Non Current Finance Lease
Liabilities |
|
30.5 |
|
|
|
31.5 |
|
| Commitments and
Contingencies |
|
|
|
| Embecta Corp.
Equity |
|
|
|
|
Common stock, $0.01 par valueAuthorized - 250,000,000Issued and
outstanding - 57,676,467 as of June 30, 2024 and 57,333,353 as
of September 30, 2023 |
$ |
0.6 |
|
|
$ |
0.6 |
|
|
Additional paid-in capital |
|
46.2 |
|
|
|
27.9 |
|
|
Accumulated deficit |
|
(504.2 |
) |
|
|
(541.1 |
) |
|
Accumulated other comprehensive loss |
|
(306.3 |
) |
|
|
(309.1 |
) |
|
Total Equity |
|
(763.7 |
) |
|
|
(821.7 |
) |
| Total Liabilities and Equity |
$ |
1,267.5 |
|
|
$ |
1,214.4 |
|
|
Condensed Consolidated Statements of Cash
Flows |
|
Embecta Corp. |
|
(Unaudited, in millions) |
| |
| |
Nine Months EndedJune 30, |
| |
2024 |
|
2023 |
| Operating
Activities |
|
|
|
|
Net income |
$ |
63.7 |
|
|
$ |
64.4 |
|
|
Adjustments to net income to derive net cash provided by operating
activities: |
|
|
|
|
Depreciation and amortization |
|
26.7 |
|
|
|
23.3 |
|
|
Amortization of debt issuance costs |
|
4.8 |
|
|
|
4.8 |
|
|
Amortization of cloud computing arrangements |
|
3.8 |
|
|
|
— |
|
|
Stock-based compensation |
|
20.1 |
|
|
|
16.6 |
|
|
Deferred income taxes |
|
(42.9 |
) |
|
|
2.2 |
|
|
Change in operating assets and liabilities: |
|
|
|
|
Trade receivables, net |
|
(156.2 |
) |
|
|
3.1 |
|
|
Inventories |
|
(32.8 |
) |
|
|
(42.5 |
) |
|
Due from/due to Becton, Dickinson and
Company |
|
49.2 |
|
|
|
(54.8 |
) |
|
Prepaid expenses and other |
|
53.7 |
|
|
|
(29.2 |
) |
|
Accounts payable, accrued expenses and other
current liabilities |
|
34.5 |
|
|
|
53.3 |
|
|
Income and other net taxes payable |
|
7.2 |
|
|
|
11.3 |
|
|
Other assets and liabilities, net |
|
(22.7 |
) |
|
|
(14.4 |
) |
|
Net Cash Provided by Operating Activities |
$ |
9.1 |
|
|
$ |
38.1 |
|
| Investing
Activities |
|
|
|
|
Capital expenditures |
$ |
(15.8 |
) |
|
$ |
(17.3 |
) |
|
Net cash used for investing activities |
$ |
(15.8 |
) |
|
$ |
(17.3 |
) |
| Financing
Activities |
|
|
|
|
Payments on long-term debt |
$ |
(7.2 |
) |
|
$ |
(7.1 |
) |
|
Payments related to tax withholding for
stock-based compensation |
|
(2.8 |
) |
|
|
(3.4 |
) |
|
Payments on finance lease |
|
(1.0 |
) |
|
|
(2.7 |
) |
|
Dividend payments |
|
(25.8 |
) |
|
|
(25.8 |
) |
|
Net cash used for financing activities |
$ |
(36.8 |
) |
|
$ |
(39.0 |
) |
|
Effect of exchange rate changes on cash and equivalents and
restricted cash |
|
(1.2 |
) |
|
|
4.7 |
|
|
Net Change in Cash and equivalents and restricted cash |
$ |
(44.7 |
) |
|
$ |
(13.5 |
) |
|
Opening Cash and equivalents and restricted cash |
|
326.5 |
|
|
|
330.9 |
|
|
Closing Cash and equivalents and restricted cash |
$ |
281.8 |
|
|
$ |
317.4 |
|
About Non-GAAP financial
measures
In evaluating our operating performance, we
supplement the reporting of our financial information determined
under GAAP with certain non-GAAP financial measures including (i)
earnings before interest, taxes, depreciation, and amortization
(“EBITDA”), (ii) Adjusted EBITDA and Adjusted EBITDA Margin, (iii)
Adjusted Gross Profit and Adjusted Gross Profit Margin, (iv)
Constant Currency revenue growth, (v) Adjusted Operating Income and
Adjusted Operating Income Margin, and (vi) Adjusted Net Income and
Adjusted earnings per diluted share. These non-GAAP financial
measures are indicators of our performance that are not required
by, or presented in accordance with, GAAP. They are presented with
the intent of providing greater transparency to financial
information used by us in our financial analysis and operational
decision-making. We believe that these non-GAAP measures provide
meaningful information to assist investors, stockholders and other
readers of our consolidated financial statements in making
comparisons to our historical operating results and analyzing the
underlying performance of our results of operations. However, the
presentation of these measures has limitations as an analytical
tool and should not be considered in isolation, or as a substitute
for the company’s results as reported under GAAP. Because not all
companies use identical calculations, the presentations of these
non-GAAP measures may not be comparable to other similarly titled
measures of other companies. The Company uses non-GAAP financial
measures in its operational and financial decision making, and
believes that it is useful to exclude certain items in order to
focus on what it regards to be a meaningful alternative
representation of the underlying operating performance of the
business.
For the three and nine month periods ended
June 30, 2024 and 2023, the reconciliation of GAAP net income
to EBITDA and adjusted EBITDA was as follows (unaudited, in
millions):
| |
Three Months EndedJune 30, |
|
Nine Months EndedJune 30, |
| |
|
|
|
|
|
|
|
| |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
GAAP Net Income |
$ |
14.7 |
|
|
$ |
15.2 |
|
|
$ |
63.7 |
|
|
$ |
64.4 |
|
| Interest expense, net |
|
27.8 |
|
|
|
27.0 |
|
|
|
83.3 |
|
|
|
79.4 |
|
| Income tax provision
(benefit) |
|
12.3 |
|
|
|
4.9 |
|
|
|
(12.5 |
) |
|
|
36.3 |
|
| Depreciation and
amortization |
|
8.9 |
|
|
|
8.1 |
|
|
|
26.7 |
|
|
|
23.3 |
|
| EBITDA |
$ |
63.7 |
|
|
$ |
55.2 |
|
|
$ |
161.2 |
|
|
$ |
203.4 |
|
| Stock-based compensation expense
(1) |
|
6.5 |
|
|
|
5.7 |
|
|
|
20.4 |
|
|
|
17.0 |
|
| One-time stand up costs (2) |
|
23.1 |
|
|
|
25.5 |
|
|
|
85.0 |
|
|
|
61.9 |
|
| European regulatory
initiative-related costs ("EU MDR") (3) |
|
0.1 |
|
|
|
0.2 |
|
|
|
0.3 |
|
|
|
0.7 |
|
| Business optimization and
severance related costs (4) |
|
2.8 |
|
|
|
1.4 |
|
|
|
5.7 |
|
|
|
3.0 |
|
| Deferred jurisdiction adjustments
in Other income (expense), net for taxes (5) |
|
0.8 |
|
|
|
4.2 |
|
|
|
4.0 |
|
|
|
13.1 |
|
| Amortization of cloud computing
arrangements (6) |
|
2.2 |
|
|
|
— |
|
|
|
3.8 |
|
|
|
— |
|
| Adjusted
EBITDA |
$ |
99.2 |
|
|
$ |
92.2 |
|
|
$ |
280.4 |
|
|
$ |
299.1 |
|
| Adjusted EBITDA
Margin |
|
36.4 |
% |
|
|
32.2 |
% |
|
|
33.5 |
% |
|
|
35.7 |
% |
|
(1) |
Represents stock-based compensation expense incurred during the
three and nine months ended June 30, 2024 and 2023,
respectively. For the three months ended, June 30, 2024,
$5.3 million is recorded in Selling and administrative
expense, $0.6 million is recorded in Cost of products sold,
and $0.6 million is recorded in Research and development
expense. For the three months ended, June 30, 2023,
$4.6 million is recorded in Selling and administrative
expense, $0.6 million is recorded in Cost of products sold,
and $0.5 million is recorded in Research and development
expense. For the nine months ended June 30, 2024,
$16.1 million is recorded in Selling and administrative
expense, $2.6 million is recorded in Cost of products sold,
and $1.7 million is recorded in Research and development
expense. For the nine months ended June 30, 2023,
$14.0 million is recorded in Selling and administrative
expense, $1.7 million is recorded in Cost of products sold,
and $1.3 million is recorded in Research and development
expense. |
|
(2) |
One-time stand-up costs incurred primarily include: (i) product
registration and labeling costs; (ii) warehousing and distribution
set-up costs; (iii) legal costs associated with patents and
trademark work; (iv) temporary headcount resources within
accounting, tax, finance, human resources, regulatory and IT; and
(v) one-time business integration and IT related costs primarily
associated with our global ERP implementation. For the three months
ended June 30, 2024, approximately $23.0 million is recorded
in Other operating expenses and $0.1 million is recorded in
Selling and administrative expense. For the three months ended June
30, 2023, approximately $25.5 million is recorded in Other
operating expenses. For the nine months ended June 30, 2024,
approximately $83.9 million is recorded in Other operating
expenses and $1.1 million is recorded in Selling and
administrative expense. For the nine months ended June 30, 2023,
approximately $61.1 million is recorded in Other operating
expenses and $0.8 million is recorded in Selling and
administrative expense. |
|
(3) |
Represents costs required to develop processes and systems to
comply with regulations such as the EU MDR and General Data
Protection Regulation ("GDPR") which represent a significant,
unusual change to the existing regulatory framework. We consider
these costs to be duplicative of previously incurred costs and/or
one-off costs, which are limited to a specific period of time.
These costs are recorded in Research and development expense. |
|
(4) |
Represents business optimization and severance related costs
associated with standing up the organization recorded in Other
operating expenses. |
|
(5) |
Represents amounts due to BD for tax liabilities incurred in
deferred closing jurisdictions where BD is considered the primary
obligor. |
|
(6) |
Represents amortization of implementation costs associated with
cloud computing arrangements recognized in Other operating
expenses. |
|
|
|
For the three and nine month periods ended
June 30, 2024 and 2023, the reconciliations of (1) GAAP Gross
Profit and Gross Margin to Adjusted Gross Profit and Adjusted Gross
Margin, (2) GAAP Operating Income and Operating Margin to Adjusted
Operating Income and Adjusted Operating Income Margin and (3) GAAP
Net Income to Adjusted Net Income and calculations of GAAP Net
Income per Diluted share and Adjusted Net Income per Diluted share
are as follows (unaudited in millions, except per share
amounts):
| |
Three Months EndedJune 30, |
|
Nine Months EndedJune 30, |
| |
|
|
|
|
|
|
|
| |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
GAAP Gross Profit |
$ |
190.1 |
|
|
$ |
189.5 |
|
|
$ |
561.4 |
|
|
$ |
568.1 |
|
| GAAP Gross Profit
Margin |
|
69.8 |
% |
|
|
66.2 |
% |
|
|
67.1 |
% |
|
|
67.7 |
% |
| Stock-based compensation
expense |
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
0.1 |
|
| Amortization of intangible
assets |
|
0.2 |
|
|
|
0.1 |
|
|
|
0.8 |
|
|
|
0.4 |
|
| Adjusted Gross
Profit |
$ |
190.3 |
|
|
$ |
189.6 |
|
|
$ |
562.4 |
|
|
$ |
568.6 |
|
| Adjusted Gross Profit
Margin |
|
69.8 |
% |
|
|
66.3 |
% |
|
|
67.2 |
% |
|
|
67.8 |
% |
| |
|
|
|
|
|
|
$ |
— |
|
| GAAP Operating
Income |
$ |
55.9 |
|
|
$ |
51.3 |
|
|
$ |
140.6 |
|
|
$ |
195.7 |
|
| GAAP Operating Income
Margin |
|
20.5 |
% |
|
|
17.9 |
% |
|
|
16.8 |
% |
|
|
23.3 |
% |
| Amortization of intangible
assets(1) |
|
0.2 |
|
|
|
0.1 |
|
|
|
0.8 |
|
|
|
0.4 |
|
| One-time stand up costs(2) |
|
23.1 |
|
|
|
25.5 |
|
|
|
85.0 |
|
|
|
61.9 |
|
| EU MDR(3) |
|
0.1 |
|
|
|
0.2 |
|
|
|
0.3 |
|
|
|
0.7 |
|
| Stock-based compensation
expense(4) |
|
1.2 |
|
|
|
1.3 |
|
|
|
3.3 |
|
|
|
4.6 |
|
| Business optimization and
severance related costs(5) |
|
2.8 |
|
|
|
1.4 |
|
|
|
5.7 |
|
|
|
3.0 |
|
| Adjusted Operating
Income |
$ |
83.3 |
|
|
$ |
79.8 |
|
|
$ |
235.7 |
|
|
$ |
266.3 |
|
| Adjusted Operating Income
Margin |
|
30.6 |
% |
|
|
27.9 |
% |
|
|
28.2 |
% |
|
|
31.7 |
% |
| |
|
|
|
|
|
|
|
| GAAP Net
Income |
$ |
14.7 |
|
|
$ |
15.2 |
|
|
$ |
63.7 |
|
|
$ |
64.4 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
GAAP Income tax provision (benefit) |
|
12.3 |
|
|
|
4.9 |
|
|
|
(12.5 |
) |
|
|
36.3 |
|
|
Amortization of intangible assets(1) |
|
0.2 |
|
|
|
0.1 |
|
|
|
0.8 |
|
|
|
0.4 |
|
|
One-time stand up costs(2) |
|
23.1 |
|
|
|
25.5 |
|
|
|
85.0 |
|
|
|
61.9 |
|
|
EU MDR(3) |
|
0.1 |
|
|
|
0.2 |
|
|
|
0.3 |
|
|
|
0.7 |
|
|
Stock-based compensation expense(4) |
|
1.2 |
|
|
|
1.3 |
|
|
|
3.3 |
|
|
|
4.6 |
|
|
Business optimization and severance related costs(5) |
|
2.8 |
|
|
|
1.4 |
|
|
|
5.7 |
|
|
|
3.0 |
|
|
Deferred jurisdiction adjustments in Other income (expense), net
for taxes(6) |
|
0.8 |
|
|
|
4.2 |
|
|
|
4.0 |
|
|
|
13.1 |
|
|
Non-GAAP Income tax provision(7) |
|
(12.2 |
) |
|
|
(13.0 |
) |
|
|
(33.1 |
) |
|
|
(45.9 |
) |
| Adjusted Net
Income |
$ |
43.0 |
|
|
$ |
39.8 |
|
|
$ |
117.2 |
|
|
$ |
138.5 |
|
| |
|
|
|
|
|
|
|
| GAAP Net Income per
Diluted share |
$ |
0.25 |
|
|
$ |
0.26 |
|
|
$ |
1.10 |
|
|
$ |
1.12 |
|
| Adjusted Net Income per
Diluted share |
$ |
0.74 |
|
|
$ |
0.69 |
|
|
$ |
2.02 |
|
|
$ |
2.40 |
|
| |
|
|
|
|
|
|
|
| Diluted weighted-average
shares outstanding (in thousands) |
|
57,842 |
|
|
|
57,582 |
|
|
|
58,143 |
|
|
|
57,714 |
|
|
(1) |
Amortization of intangible assets is recorded in Cost of products
sold. |
|
(2) |
One-time stand-up costs incurred primarily include: (i) product
registration and labeling costs; (ii) warehousing and distribution
set-up costs; (iii) legal costs associated with patents and
trademark work; (iv) temporary headcount resources within
accounting, tax, finance, human resources, regulatory and IT; and
(v) one-time business integration and IT related costs primarily
associated with our global ERP implementation. For the three months
ended June 30, 2024, approximately $23.0 million is recorded
in Other operating expenses and $0.1 million is recorded in
Selling and administrative expense. For the three months ended June
30, 2023, approximately $25.5 million is recorded in Other
operating expenses. For the nine months ended June 30, 2024,
approximately $83.9 million is recorded in Other operating
expenses and $1.1 million is recorded in Selling and
administrative expense. For the nine months ended June 30, 2023,
approximately $61.1 million is recorded in Other operating
expenses and $0.8 million is recorded in Selling and
administrative expense. |
|
(3) |
Represents costs required to develop processes and systems to
comply with regulations such as the EU MDR and GDPR which represent
a significant, unusual change to the existing regulatory framework.
We consider these costs to be duplicative of previously incurred
costs and/or one-off costs, which are limited to a specific period
of time. These costs are recorded in Research and development
expense. |
|
(4) |
Represents stock-based compensation expense recognized during the
period associated with the incremental value of converted legacy BD
share-based awards and one-time sign-on equity awards granted to
certain members of the Embecta leadership team in connection with
the separation from BD. For the three months ended June 30,
2024, $1.2 million is recorded in Selling and administrative
expense. For the three months ended June 30, 2023, $1.3 million is
recorded in Selling and administrative expense. For the nine months
ended June 30, 2024, $3.0 million is recorded in Selling
and administrative expense, $0.2 million is recorded in Cost
of products sold and $0.1 million is recorded in Research and
development expense. For the nine months ended June 30, 2023, $4.4
million is recorded in Selling and administrative expense, $0.1
million is recorded in Cost of products sold, and $0.1 million is
recorded in Research and development expense. |
|
(5) |
Represents business optimization and severance related costs
associated with standing up the organization recorded in Other
operating expenses. |
|
(6) |
Represents amounts due to BD for tax liabilities incurred in
deferred jurisdictions where BD is considered the primary
obligor. |
|
(7) |
Represents the amount of tax expense that the Company estimates
that it would record if it used non-GAAP results instead of GAAP
results in the calculation of its tax provision. The non-GAAP
effective tax rates for the three and nine months ended June 30,
2024 were 22.1% and 22.0%, respectively. The non-GAAP effective tax
rates for the three and nine months ended June 30, 2023 were 24.6%
and 24.9%, respectively. |
|
|
|
Each reporting period, we face currency exposure that arises
from translating the results of our worldwide operations to the
U.S. dollar at exchange rates that fluctuate from the beginning of
such period. A stronger U.S. dollar, compared to the prior-year
period, resulted in an unfavorable foreign currency translation
impact to our revenues as compared to the prior-year period. We
evaluate our results of operations on both a reported and a
Constant Currency basis, which excludes the impact of fluctuations
in foreign currency exchange rates by comparing results between
periods as if exchange rates had remained constant
period-over-period. As exchange rates are an important factor in
understanding period-to-period comparisons, we believe the
presentation of results on a Constant Currency basis in addition to
reported results helps improve investors’ ability to understand our
operating results and evaluate our performance in comparison to
prior periods. We calculate Constant Currency percentages by
converting our current-period local currency financial results
using the prior-period foreign currency exchange rates and
comparing these adjusted amounts to our current-period results.
These results should be considered in addition to, not as a
substitute for, results reported in accordance with GAAP. Results
on a Constant Currency basis, as we present them, may not be
comparable to similarly titled measures used by other companies and
are not measures of performance presented in accordance with
GAAP.
For the three and nine month periods ended June 30, 2024
and 2023, the reconciliation of revenue growth to Constant Currency
was as follows:
| |
Three months ended June 30, |
|
Dollars in millions |
2024 |
|
2023 |
|
TotalChange |
|
Estimated FXImpact |
|
ConstantCurrencyChange |
|
Total Revenues |
$ |
272.5 |
|
$ |
286.1 |
|
(4.8 |
)% |
|
(0.9 |
)% |
|
(3.9 |
)% |
| |
Nine months ended June 30, |
| Dollars in
millions |
2024 |
|
2023 |
|
TotalChange |
|
Estimated FXImpact |
|
ConstantCurrencyChange |
|
Total Revenues |
$ |
837.0 |
|
$ |
838.9 |
|
(0.2 |
)% |
|
(0.3 |
)% |
|
0.1 |
% |
About Embecta
embecta is a global diabetes care company that
is leveraging its nearly 100-year legacy in insulin delivery to
empower people with diabetes to live their best life through
innovative solutions, partnerships and the passion of approximately
2,000 employees around the globe. For more information, visit
embecta.com or follow our social channels on LinkedIn, Facebook,
Instagram and Twitter.
Safe Harbor Statement Regarding
Forward-Looking Statements
This press release contains express or implied
"forward-looking statements" as that term is defined in the Private
Securities Litigation Reform Act of 1995 and other securities laws.
These forward-looking statements concern our current expectations
regarding our future results from operations, performance,
financial condition, goals, strategies, plans, achievements, and
anticipated product clearances, approvals and launches. These
forward-looking statements are subject to various known and unknown
risks, uncertainties and other factors, and you should not rely
upon them except as statements of our present intentions and of our
present expectations, which may or may not occur. When we use words
such as “believes,” “expects,” “anticipates,” “estimates,”
“intends,” “plans,” “pursue,” “will” or similar expressions, we are
making forward-looking statements. For example, embecta is using
forward-looking statements when it discusses its fiscal 2024
financial guidance, standing embecta up as independent company,
maintaining stability with its core injection business and
investing in growth, including with respect to working with the FDA
to obtain clearance for new and anticipated products and launches,
advancing the development of its closed loop insulin delivery
system, and its intention to commercialize new product pacts for
non-insulin diabetes drugs. Although we believe that our
forward-looking statements are based on reasonable assumptions, our
expected results may not be achieved, and actual results may differ
materially from our expectations. In addition, important factors
that could cause actual results to differ from expectations
include, among others: (i) competitive factors that could adversely
affect embecta’s operations; (ii) any inability to replace the
services provided by BD under the Transition Services Agreement,
the Logistics Services Agreement and other transaction documents;
(iii) any failure by BD to perform its obligations under the
various separation agreements entered into in connection with the
separation and distribution; (iv) any events that adversely affect
the sale or profitability of embecta’s products or the revenues
delivered from sales to its customers; (v) increases in operating
costs, including fluctuations in the cost and availability of raw
materials or 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; (vi) changes in reimbursement practices of governments
or private payers or other cost containment measures; (vii) 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; (viii) the impact of changes in
U.S. federal laws and policy that could affect fiscal and tax
policies, healthcare and international trade, including import and
export regulation and international trade agreements; (ix) any new
pandemic, such as the COVID-19 pandemic, or any geopolitical
instability, including disruptions in its operations and supply
chains; (x) new or changing laws and regulations, or changes in
enforcement practices, including laws relating to healthcare,
environmental protection, trade, monetary and fiscal policies,
taxation and licensing and regulatory requirements for products;
(xi) the expected benefits of the separation from BD; (xii) risks
associated with embecta’s indebtedness; (xiii) the risk that
ongoing dis-synergy costs, costs of restructuring and other costs
incurred in connection with the separation from BD will exceed our
estimates of these costs; (xiv) the risk that it will be more
difficult than expected to effect embecta’s full separation from
BD; (xv) risks associated with not completing strategic
collaborative partnerships and acquisitions for innovative
technologies, complementary product lines, and new markets; (xvi)
embecta’s ability to obtain clearance from the FDA of any product;
(xvii) its ability to market and sell such products successfully;
(xviii) its ability to anticipate the needs of people with
diabetes; (xix) its ability to successfully complete clinical
trials, obtain regulatory clearance and obtain approvals for its
products; (xx) its ability to manufacture such products in a
cost-effective manner, obtain appropriate intellectual property
protection for such products, gain and maintain market acceptance
of such products, secure distribution channels, and obtain access,
coverage and reimbursement for such products; (xxi) future business
decisions made by embecta and its competitors; and (xxii) the other
risks described in our periodic reports filed with the Securities
and Exchange Commission, including under the caption “Risk Factors”
in our most recent Annual Report on Form 10-K, as further updated
by our Quarterly Reports on Form 10-Q we have filed or will file
hereafter. Except as required by law, we undertake no obligation to
update any forward-looking statements appearing in this
release.
CONTACTS
Investors:Pravesh KhandelwalVP, Head of Investor
Relations551-264-6547Contact IR
Media: Christian GlazarSr. Director, Corporate
Communications 908-821-6922Contact Media Relations
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