Embecta Corp. (“embecta” or the "Company") (Nasdaq: EMBC), a global
diabetes care company, today reported financial results for the
three- and twelve-month periods ended September 30, 2024.
"We are pleased to report a strong fourth
quarter and end to our fiscal year, as we once again delivered
results that exceeded our expectations across key financial
metrics. We continued to execute on our strategic priorities, and
to date, our significant accomplishments include the successful
transition of approximately 98% of our revenue to our own ERP
system, shared service capabilities, and distribution
infrastructure, with India remaining as our only deferred market.
Additionally, the recent launch of our small-pack GLP-1 needles in
Germany has gone well, and we are evaluating expanding into other
markets," said Devdatt (Dev) Kurdikar, Chief Executive Officer of
embecta.
Mr. Kurdikar continued: "As our stand-up work
nears completion and following an in-depth review of our portfolio
and strategy, we have decided to discontinue our insulin patch pump
program and initiate an organizational restructuring plan. We
believe this approach will streamline operations, reduce costs and
enhance our profitability and free cash flow profile. We intend to
concentrate our resources on our core business and to prioritize
our free cash flow towards paying down debt which we expect will
give us the financial flexibility needed for future
investments."
The Company currently expects to incur total
pre-tax charges of between $35 million and $45 million in fiscal
year 2025 related to the restructuring plan, consisting of between
$25 million and $30 million in pre-tax, cash charges for planned
workforce reductions and other associated costs from the
discontinuation of the patch pump program, and between $10 million
and $15 million in pre-tax, non-cash charges for asset impairments
and write-offs. Note, these preliminary estimates may be revised
following the completion of the ongoing analysis of the expected
additional pre-tax non-cash charges associated with the
implementation of the restructuring plan.
The Company expects the restructuring plan to be
substantially complete during the first half of fiscal year 2025
and expects the discontinuation of the patch pump program and
organizational restructuring plan to generate annualized pre-tax
cost savings of between $60 million and $65 million. Given the
organizational restructuring plan, the Company has decided to
postpone the previously announced Analyst & Investor Day to
Spring 2025.
Fourth Quarter Fiscal Year 2024 Financial
Highlights:
-
Reported Revenues of $286.1 million, up 1.5%;
-
Adjusted Revenues of $290.2 million, up 4.1% on an adjusted
constant currency basis
-
U.S. revenues increased 10.3% on both a reported and adjusted
constant currency basis
-
International revenues decreased 8.8% on a reported basis, and
decreased 3.1% on an adjusted constant currency basis
-
Gross profit and margin of $173.8 million and 60.7%, compared to
$181.8 million and 64.5% in the prior year period
-
Adjusted gross profit and margin of $178.3 million and 61.4%
compared to $182.6 million and 64.8% in the prior year period
-
Operating income and margin of $26.2 million and 9.2%, compared to
$25.8 million and 9.2% in the prior year period
- Adjusted operating
income and margin of $61.2 million and 21.1%, compared to $65.2
million and 23.1% in the prior year period
-
Net income of $14.6 million and earnings per diluted share of
$0.25. This compares to net income of $6.0 million and earnings per
diluted share of $0.10 in the prior year period.
-
Adjusted net income and adjusted earnings per diluted share of
$25.9 million and $0.45, compared to $34.1 million and $0.59 in the
prior year period
-
Adjusted EBITDA and margin of $73.0 million and 25.2%, compared to
$79.6 million and 28.2% in the prior year period
-
Announced a dividend of $0.15 per share
Twelve Months Ended September 30 Fiscal
Year 2024 Financial Highlights:
-
Reported Revenues of $1,123.1 million, up 0.2%;
-
Adjusted Revenues of $1,127.2 million, up 1.1% on an adjusted
constant currency basis
-
U.S. revenues increased 1.0% on both a reported and adjusted
constant currency basis
-
International revenues decreased 0.7% on a reported basis, and
increased 1.3% on an adjusted constant currency basis
-
Gross profit and margin of $735.2 million and 65.5%, compared to
$749.9 million and 66.9% in the prior year period
-
Adjusted gross profit and margin of $740.7 million and 65.7%,
compared to $751.2 million and 67.0% in the prior year period
-
Operating income and margin of $166.8 million and 14.9%, compared
to $221.5 million and 19.8% in the prior year period
-
Adjusted operating income and margin of $296.9 million and 26.3%,
compared to $331.5 million and 29.6% in the prior year period
-
Net income and earnings per diluted share of $78.3 million and
$1.34, respectively. This compares to net income and earnings per
diluted share of $70.4 million and $1.22, respectively, in the
prior year period.
-
Adjusted net income and adjusted earnings per diluted share of
$143.1 million and $2.45, compared to $172.6 million and $2.99 in
the prior year period
-
Adjusted EBITDA and margin of $353.4 million and 31.4%, compared to
$378.7 million and 33.8% in the prior year period
Adjusted Constant Currency Revenue Growth is
based upon Reported Revenues, adjusted to exclude, depending on the
period presented, the items described in Adjusted Revenues and to
eliminate the impact of translating the results of international
subsidiaries at different currency exchange rates from period to
period. The impact of changes in foreign currency may vary
significantly from period to period, and such changes generally are
outside of the control of our management. We believe that this
measure facilitates a comparison of our operating performance
exclusive of currency exchange rate fluctuations that do not
reflect our underlying performance or business trends. These
results should be considered in addition to, not as a substitute
for, results reported in accordance with GAAP. Results on an
Adjusted 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.
Fourth Quarter Fiscal Year 2024
Results:
Revenues by geographic region are as
follows:
|
Three months ended September 30, |
Dollars in
millions |
|
|
|
|
|
|
|
|
|
|
|
% Increase/(Decrease) |
|
|
2024 |
|
|
2023 |
|
Reported Revenue Growth |
|
Currency Impact |
|
Adjustment Impact |
|
Adjusted Constant Currency Revenue Growth |
|
Reported Revenues |
|
Adjustment |
|
Adjusted Revenues |
|
Reported Revenues |
|
Adjustment |
|
Adjusted Revenues |
|
% |
United States |
$ |
167.4 |
|
$ |
— |
|
|
$ |
167.4 |
|
$ |
151.8 |
|
$ |
— |
|
$ |
151.8 |
|
10.3 |
% |
|
— |
% |
|
— |
% |
|
10.3 |
% |
International1 |
|
118.7 |
|
|
(4.1 |
) |
|
|
122.8 |
|
|
130.1 |
|
|
— |
|
|
130.1 |
|
(8.8 |
) |
|
(2.6 |
) |
|
(3.1 |
) |
|
(3.1 |
) |
Total |
$ |
286.1 |
|
$ |
(4.1 |
) |
|
$ |
290.2 |
|
$ |
281.9 |
|
$ |
— |
|
$ |
281.9 |
|
1.5 |
% |
|
(1.2 |
)% |
|
(1.4 |
)% |
|
4.1 |
% |
|
Revenues by product family are as follows:
|
Three months ended September 30, |
Dollars in
millions |
|
|
|
|
|
|
|
|
|
|
|
% Increase/(Decrease) |
|
|
2024 |
|
|
2023 |
|
Reported Revenue Growth |
|
Currency Impact |
|
Adjustment Impact |
|
Adjusted Constant Currency Revenue Growth |
|
Reported Revenues |
|
Adjustment |
|
Adjusted Revenues |
|
Reported Revenues |
|
Adjustment |
|
Adjusted Revenues |
|
% |
Pen Needles |
$ |
215.2 |
|
|
$ |
— |
|
|
$ |
215.2 |
|
$ |
211.1 |
|
$ |
— |
|
$ |
211.1 |
|
1.9 |
% |
|
(0.9 |
)% |
|
— |
% |
|
2.8 |
% |
Syringes |
|
33.7 |
|
|
|
— |
|
|
|
33.7 |
|
|
33.2 |
|
|
— |
|
|
33.2 |
|
1.5 |
|
|
(3.3 |
) |
|
— |
|
|
4.8 |
|
Safety |
|
32.8 |
|
|
|
— |
|
|
|
32.8 |
|
|
31.3 |
|
|
— |
|
|
31.3 |
|
4.8 |
|
|
(1.0 |
) |
|
— |
|
|
5.8 |
|
Other2 |
|
(0.3 |
) |
|
|
(4.1 |
) |
|
|
3.8 |
|
|
3.9 |
|
|
— |
|
|
3.9 |
|
(107.7 |
) |
|
(5.1 |
) |
|
(102.6 |
) |
|
— |
|
Contract Manufacturing |
|
4.7 |
|
|
|
— |
|
|
|
4.7 |
|
|
2.4 |
|
|
— |
|
|
2.4 |
|
95.8 |
|
|
— |
|
|
— |
|
|
95.8 |
|
Total |
$ |
286.1 |
|
|
$ |
(4.1 |
) |
|
$ |
290.2 |
|
$ |
281.9 |
|
$ |
— |
|
$ |
281.9 |
|
1.5 |
% |
|
(1.2 |
)% |
|
(1.4 |
)% |
|
4.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 In 2024, International includes the
recognition of incremental Italian payback accruals resulting from
the two July 22, 2024 rulings by the Constitutional Court of Italy
relating to certain prior years since 2015 in order to arrive at
Adjusted Revenues.2 Other includes product revenue for swabs and
other accessories. In 2024, Other reflects the recognition of
incremental Italian payback accruals resulting from the two July
22, 2024 rulings by the Constitutional Court of Italy relating to
certain prior years since 2015 in order to arrive at Adjusted
Revenues.
Our revenues increased by $4.2 million, or 1.5%,
to $286.1 million for the fourth quarter of 2024 as compared to
revenues of $281.9 million for the fourth quarter of 2023. Changes
in our revenues are driven by the volume of goods that we sell, the
prices we negotiate with customers and changes in foreign exchange
rates. The increase in revenues was driven by $13.7 associated with
favorable changes in price and a $2.3 increase in contract
manufacturing revenues related to sales of non-diabetes products to
BD. This was partially offset by $5.3 million of unfavorable
gross-to-net adjustments primarily attributed to the recognition of
incremental Italian payback accruals resulting from the two July
22, 2024 rulings by the Constitutional Court of Italy, $3.4 million
associated with the negative impact of foreign currency translation
primarily due to the strengthening of the U.S. dollar, and $3.1
million of unfavorable changes in volume.
Twelve Months Fiscal Year 2024
Results:
Revenues by geographic region are as
follows:
|
Twelve months ended September 30, |
Dollars in
millions |
|
|
|
|
|
|
|
|
|
|
|
% Increase/(Decrease) |
|
|
2024 |
|
|
2023 |
|
Reported Revenue Growth |
|
Currency Impact |
|
Adjustment Impact |
|
Adjusted Constant Currency Revenue Growth |
|
Reported Revenues |
|
Adjustment |
|
Adjusted Revenues |
|
Reported Revenues |
|
Adjustment |
|
Adjusted Revenues |
|
% |
United States |
$ |
607.2 |
|
$ |
— |
|
|
$ |
607.2 |
|
$ |
601.4 |
|
$ |
— |
|
$ |
601.4 |
|
1.0 |
% |
|
— |
% |
|
— |
% |
|
1.0 |
% |
International1 |
|
515.9 |
|
|
(4.1 |
) |
|
|
520.0 |
|
|
519.4 |
|
|
— |
|
|
519.4 |
|
(0.7 |
) |
|
(1.2 |
) |
|
(0.8 |
) |
|
1.3 |
|
Total |
$ |
1,123.1 |
|
$ |
(4.1 |
) |
|
$ |
1,127.2 |
|
$ |
1,120.8 |
|
$ |
— |
|
$ |
1,120.8 |
|
0.2 |
% |
|
(0.5 |
)% |
|
(0.4 |
)% |
|
1.1 |
% |
|
Revenues by product family are as follows:
|
Twelve months ended September 30, |
Dollars in
millions |
|
|
|
|
|
|
|
|
|
|
|
% Increase/(Decrease) |
|
|
2024 |
|
|
2023 |
|
Reported Revenue Growth |
|
Currency Impact |
|
Adjustment Impact |
|
Adjusted Constant Currency Revenue Growth |
|
Reported Revenues |
|
Adjustment |
|
Adjusted Revenues |
|
Reported Revenues |
|
Adjustment |
|
Adjusted Revenues |
|
% |
Pen Needles |
$ |
844.4 |
|
$ |
— |
|
|
$ |
844.4 |
|
$ |
829.2 |
|
$ |
— |
|
$ |
829.2 |
|
1.8 |
% |
|
(0.8 |
)% |
|
— |
% |
|
2.6 |
% |
Syringes |
|
126.2 |
|
|
— |
|
|
|
126.2 |
|
|
138.1 |
|
|
— |
|
|
138.1 |
|
(8.6 |
) |
|
0.2 |
|
|
— |
|
|
(8.8 |
) |
Safety |
|
129.4 |
|
|
— |
|
|
|
129.4 |
|
|
126.3 |
|
|
— |
|
|
126.3 |
|
2.5 |
|
|
— |
|
|
— |
|
|
2.5 |
|
Other2 |
|
10.3 |
|
|
(4.1 |
) |
|
|
14.4 |
|
|
14.2 |
|
|
— |
|
|
14.2 |
|
(27.5 |
) |
|
— |
|
|
(28.2 |
) |
|
0.7 |
|
Contract
Manufacturing |
|
12.8 |
|
|
— |
|
|
|
12.8 |
|
|
13.0 |
|
|
— |
|
|
13.0 |
|
(1.5 |
) |
|
— |
|
|
— |
|
|
(1.5 |
) |
Total |
$ |
1,123.1 |
|
$ |
(4.1 |
) |
|
$ |
1,127.2 |
|
$ |
1,120.8 |
|
$ |
— |
|
$ |
1,120.8 |
|
0.2 |
% |
|
(0.5 |
)% |
|
(0.4 |
)% |
|
1.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 In 2024, International includes the
recognition of incremental Italian payback accruals resulting from
the two July 22, 2024 rulings by the Constitutional Court of Italy
relating to certain prior years since 2015 in order to arrive at
Adjusted Revenues. 2 Other includes product sales for swabs and
other accessories. In 2024, Other reflects the recognition of
incremental Italian payback accruals resulting from the two July
22, 2024 rulings by the Constitutional Court of Italy relating to
certain prior years since 2015 in order to arrive at Adjusted
Revenues.
Our revenues increased by $2.3 million, or
0.2%, to $1,123.1 million for the year ended September 30, 2024 as
compared to revenues of $1,120.8 million for the year ended
September 30, 2023. The increase in revenues was primarily driven
by $27.7 million associated with favorable changes in price. This
was partially offset by $14.5 million of unfavorable changes in
volume, $6.1 million associated with the negative impact of foreign
currency translation primarily due to the strengthening of the U.S.
dollar, $4.6 million of unfavorable gross-to-net adjustments
primarily attributed to the recognition of incremental Italian
payback accruals resulting from the two July 22, 2024 rulings by
the Constitutional Court of Italy, and a $0.2 million decrease in
contract manufacturing revenues related to sales of non-diabetes
products to BD.
Preliminary Fiscal Year 2025 Financial
Guidance:
For fiscal year 2025, excluding the patch pump
program, the Company expects:
Dollars in millions, except percentages and per share
data |
|
|
Reported Revenues |
|
$1,093 - $1,110 |
Reported Revenue Growth
(%) |
|
(2.7)% - (1.2)% |
Impact of F/X (%) |
|
(0.6)% |
Impact of Italian Payback Measure (1) (%) |
|
0.4% |
Adjusted Constant Currency
Revenue Growth (%) |
|
(2.5)% - (1.0)% |
Adjusted Gross Margin (%) |
|
63.25% - 64.25% |
Adjusted Operating Margin
(%) |
|
29.00% - 30.00% |
Adjusted Earnings per Diluted
Share |
|
$2.70 - $2.90 |
Adjusted EBITDA Margin
(%) |
|
35.50% - 36.50% |
(1) |
|
Reflects the recognition of incremental Italian payback accruals
resulting from the two July 22, 2024 rulings by the Constitutional
Court of Italy relating to certain prior years since 2015 recorded
in Revenues. |
|
|
|
We are unable to present a quantitative
reconciliation of our 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
During the fourth quarter, the Company paid an
aggregate principal amount of approximately $27.4 million
outstanding under its term loan B facility that had an interest
rate of 300 basis points over the secured overnight financing rate
(“SOFR”), with a 0.50% SOFR floor.
As of September 30, 2024, the Company had
$274.2 million in cash and equivalents and restricted cash and
$1.601 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
December 18, 2024 to stockholders of record at the close of
business on December 6, 2024.
Fiscal 2024 Fourth Quarter and Full Year
Earnings Conference Call:
Management will host a conference call at 8:00
a.m. Eastern Time (ET) on November 26, 2024 to discuss the
results of the quarter and full year, 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 November 26, 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 EndedSeptember
30, |
|
Twelve Months EndedSeptember
30, |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
Revenues |
$ |
286.1 |
|
|
$ |
281.9 |
|
|
$ |
1,123.1 |
|
|
$ |
1,120.8 |
|
Cost of
products sold |
|
112.3 |
|
|
|
100.1 |
|
|
|
387.9 |
|
|
|
370.9 |
|
Gross Profit |
$ |
173.8 |
|
|
$ |
181.8 |
|
|
$ |
735.2 |
|
|
$ |
749.9 |
|
Operating expenses: |
|
|
|
|
|
|
|
Selling
and administrative expense |
|
96.8 |
|
|
|
95.7 |
|
|
|
365.1 |
|
|
|
341.3 |
|
Research
and development expense |
|
19.8 |
|
|
|
23.6 |
|
|
|
78.8 |
|
|
|
85.2 |
|
Impairment expense |
|
— |
|
|
|
2.5 |
|
|
|
— |
|
|
|
2.5 |
|
Other
operating expenses |
|
31.0 |
|
|
|
34.2 |
|
|
|
124.5 |
|
|
|
99.4 |
|
Total Operating Expenses |
$ |
147.6 |
|
|
$ |
156.0 |
|
|
$ |
568.4 |
|
|
$ |
528.4 |
|
Operating Income |
$ |
26.2 |
|
|
$ |
25.8 |
|
|
$ |
166.8 |
|
|
$ |
221.5 |
|
Interest
expense, net |
|
(29.0 |
) |
|
|
(27.6 |
) |
|
|
(112.3 |
) |
|
|
(107.0 |
) |
Other
income (expense), net |
|
(4.2 |
) |
|
|
6.8 |
|
|
|
(10.3 |
) |
|
|
(8.8 |
) |
Income
(Loss) Before Income Taxes |
$ |
(7.0 |
) |
|
$ |
5.0 |
|
|
$ |
44.2 |
|
|
$ |
105.7 |
|
Income
tax provision (benefit) |
|
(21.6 |
) |
|
|
(1.0 |
) |
|
|
(34.1 |
) |
|
|
35.3 |
|
Net Income |
$ |
14.6 |
|
|
$ |
6.0 |
|
|
$ |
78.3 |
|
|
$ |
70.4 |
|
|
|
|
|
|
|
|
|
Net
Income per common share: |
|
|
|
|
|
|
|
Basic |
$ |
0.25 |
|
|
$ |
0.10 |
|
|
$ |
1.36 |
|
|
$ |
1.23 |
|
Diluted |
$ |
0.25 |
|
|
$ |
0.10 |
|
|
$ |
1.34 |
|
|
$ |
1.22 |
|
|
|
Condensed Consolidated Balance
SheetsEmbecta Corp.(Unaudited, in
millions, except share and per share data) |
|
|
September 30, 2024 |
|
September 30, 2023 |
Assets |
|
|
|
Current Assets |
|
|
|
Cash and equivalents |
$ |
267.5 |
|
|
$ |
326.3 |
|
Restricted cash |
|
6.7 |
|
|
|
0.2 |
|
Trade receivables, net (net of allowance for doubtful accounts of
$2.8 million and $1.0 million as of September 30, 2024 and
September 30, 2023, respectively) |
|
193.0 |
|
|
|
16.7 |
|
Inventories: |
|
|
|
Materials |
|
40.4 |
|
|
|
32.1 |
|
Work in process |
|
4.8 |
|
|
|
8.1 |
|
Finished products |
|
126.3 |
|
|
|
111.9 |
|
Total Inventories |
$ |
171.5 |
|
|
$ |
152.1 |
|
Amounts due from Becton, Dickinson and Company |
|
53.8 |
|
|
|
142.4 |
|
Prepaid expenses and other |
|
68.5 |
|
|
|
111.4 |
|
Total Current Assets |
$ |
761.0 |
|
|
$ |
749.1 |
|
Property, Plant and Equipment, Net |
|
290.4 |
|
|
|
300.2 |
|
Goodwill
and Intangible Assets |
|
23.7 |
|
|
|
24.7 |
|
Deferred
Income Taxes and Other Assets |
|
210.2 |
|
|
|
140.4 |
|
Total
Assets |
$ |
1,285.3 |
|
|
$ |
1,214.4 |
|
Liabilities and Equity |
|
|
|
Current Liabilities |
|
|
|
Accounts payable |
$ |
91.0 |
|
|
$ |
53.5 |
|
Accrued expenses |
|
134.2 |
|
|
|
118.1 |
|
Amounts due to Becton, Dickinson and Company |
|
42.5 |
|
|
|
73.1 |
|
Salaries, wages and related items |
|
66.7 |
|
|
|
62.1 |
|
Current debt obligations |
|
9.5 |
|
|
|
9.5 |
|
Current finance lease liabilities |
|
3.4 |
|
|
|
3.6 |
|
Income taxes |
|
26.7 |
|
|
|
33.6 |
|
Total Current Liabilities |
$ |
374.0 |
|
|
$ |
353.5 |
|
Deferred
Income Taxes and Other Liabilities |
|
54.1 |
|
|
|
57.2 |
|
Long-Term Debt |
|
1,565.3 |
|
|
|
1,593.9 |
|
Non
Current Finance Lease Liabilities |
|
30.2 |
|
|
|
31.5 |
|
Contingencies |
|
|
|
Embecta Corp. Equity |
|
|
|
Common stock, $0.01 par valueAuthorized - 250,000,000Issued and
outstanding - 57,707,285 as of September 30, 2024 and
57,333,353 as of September 30, 2023 |
|
0.6 |
|
|
|
0.6 |
|
Additional paid-in capital |
|
52.5 |
|
|
|
27.9 |
|
Accumulated deficit |
|
(498.6 |
) |
|
|
(541.1 |
) |
Accumulated other comprehensive loss |
|
(292.8 |
) |
|
|
(309.1 |
) |
Total Equity |
|
(738.3 |
) |
|
|
(821.7 |
) |
Total
Liabilities and Equity |
$ |
1,285.3 |
|
|
$ |
1,214.4 |
|
|
|
Condensed Consolidated Statements of Cash
FlowsEmbecta Corp.(Unaudited, in
millions) |
|
|
Twelve Months EndedSeptember
30, |
|
|
2024 |
|
|
|
2023 |
|
Operating Activities |
|
|
|
Net income |
$ |
78.3 |
|
|
$ |
70.4 |
|
Adjustments to net income to derive net cash provided by operating
activities: |
|
|
|
Depreciation and amortization |
|
36.2 |
|
|
|
32.6 |
|
Amortization of debt issuance costs |
|
6.9 |
|
|
|
6.4 |
|
Amortization of cloud computing costs |
|
6.3 |
|
|
|
— |
|
Impairment of property, plant and equipment |
|
— |
|
|
|
2.5 |
|
Stock-based compensation |
|
26.3 |
|
|
|
21.5 |
|
Deferred income taxes |
|
(70.6 |
) |
|
|
14.3 |
|
Change in operating assets and liabilities: |
|
|
|
Trade receivables, net |
|
(174.7 |
) |
|
|
7.0 |
|
Inventories |
|
(16.5 |
) |
|
|
(28.8 |
) |
Due from/due to Becton, Dickinson and Company |
|
58.9 |
|
|
|
(23.2 |
) |
Prepaid expenses and other |
|
19.9 |
|
|
|
(14.2 |
) |
Accounts payable, accrued expenses and other current
liabilities |
|
60.0 |
|
|
|
7.9 |
|
Income and other net taxes payable |
|
32.8 |
|
|
|
(12.6 |
) |
Other assets and liabilities, net |
|
(28.1 |
) |
|
|
(16.1 |
) |
Net Cash Provided by Operating Activities |
$ |
35.7 |
|
|
$ |
67.7 |
|
Investing Activities |
|
|
|
Capital expenditures |
|
(15.8 |
) |
|
|
(26.5 |
) |
Net Cash Used for Investing Activities |
$ |
(15.8 |
) |
|
$ |
(26.5 |
) |
Financing Activities |
|
|
|
Payments on long-term debt |
|
(34.6 |
) |
|
|
(9.5 |
) |
Payments related to tax withholding for stock-based
compensation |
|
(3.0 |
) |
|
|
(3.6 |
) |
Payments on finance lease |
|
(1.3 |
) |
|
|
(1.2 |
) |
Dividend payments |
|
(34.5 |
) |
|
|
(34.4 |
) |
Net Cash Used for Financing Activities |
$ |
(73.4 |
) |
|
$ |
(48.7 |
) |
Effect of exchange rate changes on cash and equivalents and
restricted cash |
|
1.2 |
|
|
|
3.1 |
|
Net Change in Cash and equivalents and restricted cash |
$ |
(52.3 |
) |
|
$ |
(4.4 |
) |
Opening Cash and equivalents and restricted cash |
|
326.5 |
|
|
|
330.9 |
|
Closing Cash and equivalents and restricted cash |
$ |
274.2 |
|
|
$ |
326.5 |
|
|
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)
Adjusted Revenues, (ii) earnings before interest, taxes,
depreciation, and amortization (“EBITDA”), (iii) Adjusted EBITDA
and Adjusted EBITDA Margin, (iv) Adjusted Gross Profit and Adjusted
Gross Profit Margin, (v) Adjusted Constant Currency Revenue Growth,
(vi) Adjusted Operating Income and Adjusted Operating Income
Margin, and (vii) 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 twelve-month periods ended
September 30, 2024 and 2023, the reconciliation of (1) GAAP
Revenues ("Reported Revenues") to Adjusted Revenues and (2) GAAP
Net income to EBITDA and Adjusted EBITDA was as follows (unaudited,
in millions)
|
|
Three Months Ended September 30, |
|
Twelve Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Reported
Revenues |
$ |
286.1 |
|
|
$ |
281.9 |
|
|
$ |
1,123.1 |
|
|
$ |
1,120.8 |
|
Italian payback measure
(1) |
|
4.1 |
|
|
|
— |
|
|
|
4.1 |
|
|
|
— |
|
Adjusted
Revenues |
$ |
290.2 |
|
|
$ |
281.9 |
|
|
$ |
1,127.2 |
|
|
$ |
1,120.8 |
|
|
|
|
|
|
|
|
|
GAAP Net
Income |
$ |
14.6 |
|
|
$ |
6.0 |
|
|
$ |
78.3 |
|
|
$ |
70.4 |
|
Interest expense, net |
|
29.0 |
|
|
|
27.6 |
|
|
|
112.3 |
|
|
|
107.0 |
|
Income taxes |
|
(21.6 |
) |
|
|
(1.0 |
) |
|
|
(34.1 |
) |
|
|
35.3 |
|
Depreciation and
amortization |
|
9.5 |
|
|
|
9.3 |
|
|
|
36.2 |
|
|
|
32.6 |
|
EBITDA |
$ |
31.5 |
|
|
$ |
41.9 |
|
|
$ |
192.7 |
|
|
$ |
245.3 |
|
Stock-based compensation
expense (2) |
|
6.2 |
|
|
|
4.9 |
|
|
|
26.6 |
|
|
|
21.9 |
|
One-time stand up costs
(3) |
|
26.2 |
|
|
|
31.8 |
|
|
|
111.2 |
|
|
|
93.7 |
|
European regulatory
initiative-related costs ("EU MDR") (4) |
|
0.2 |
|
|
|
0.6 |
|
|
|
0.5 |
|
|
|
1.3 |
|
Business optimization and
severance related costs (5) |
|
1.7 |
|
|
|
2.6 |
|
|
|
7.4 |
|
|
|
5.6 |
|
Impairment losses (6) |
|
— |
|
|
|
2.5 |
|
|
|
— |
|
|
|
2.5 |
|
Deferred jurisdiction
adjustments in Other income (expense), net for taxes (7) |
|
0.6 |
|
|
|
(4.7 |
) |
|
|
4.6 |
|
|
|
8.4 |
|
Amortization of cloud
computing arrangements (8) |
|
2.5 |
|
|
|
— |
|
|
|
6.3 |
|
|
|
— |
|
Italian payback measure
(1) |
|
4.1 |
|
|
|
— |
|
|
|
4.1 |
|
|
|
— |
|
Adjusted
EBITDA |
$ |
73.0 |
|
|
$ |
79.6 |
|
|
$ |
353.4 |
|
|
$ |
378.7 |
|
Adjusted EBITDA
Margin |
|
25.2 |
% |
|
|
28.2 |
% |
|
|
31.4 |
% |
|
|
33.8 |
% |
1 |
|
Reflects the recognition of incremental Italian payback accruals
resulting from the two July 22, 2024 rulings by the Constitutional
Court of Italy relating to certain prior years since 2015 recorded
in Revenues. |
2. |
|
Represents stock-based compensation expense incurred during the
three and twelve months ended September 30, 2024 and 2023,
respectively. For the three months ended September 30, 2024,
$5.3 million is recorded in Selling and administrative expense,
$0.4 million is recorded in Cost of products sold, and $0.5 million
is recorded in Research and development expense. For the twelve
months ended September 30, 2024, $21.4 million is recorded in
Selling and administrative expense, $3.0 million is recorded in
Cost of products sold, and $2.2 million is recorded in Research and
development expense. For the three months ended September 30,
2023, $4.1 million is recorded in Selling and administrative
expense, $0.4 million is recorded in Cost of products sold, and
$0.4 million is recorded in Research and development expense. For
the twelve months ended September 30, 2023, $18.1 million is
recorded in Selling and administrative expense, $2.2 million is
recorded in Cost of products sold, and $1.6 million is recorded in
Research and development expense. |
3. |
|
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 September 30, 2024, approximately $26.0 million and
$0.2 million are recorded in Other operating expenses and
Selling and administrative expense, respectively. For the twelve
months ended September 30, 2024, approximately
$109.9 million and $1.3 million are recorded in Other
operating expenses and Selling and administrative expense,
respectively. For the three months ended September 30, 2023,
approximately $31.6 million and $0.2 million are recorded in
Other operating expenses and Selling and administrative expense,
respectively. For the twelve months ended September 30, 2023,
approximately $92.7 million and $1.0 million are recorded in Other
operating expenses and Selling and administrative expense,
respectively. |
4. |
|
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. |
5. |
|
Represents business optimization and severance related costs
associated with standing up the organization recorded in Other
operating expenses. |
6. |
|
Relates to impairment charges incurred related to the abandonment
of certain manufacturing equipment in China that is no longer in
use that was inherited as part of the Separation from BD. The
impairment charges are recorded in Impairment Expense. |
7. |
|
Represents amounts due to BD for tax liabilities incurred in
deferred closing jurisdictions where BD is considered the primary
obligor. |
8. |
|
Represents amortization of implementation costs associated with
cloud computing arrangements recorded in Other operating
expenses. |
|
|
|
For the three- and twelve-month periods ended
September 30, 2024, the reconciliations of (1) GAAP Revenues
("Reported Revenues") to Adjusted Revenues (2) GAAP Gross Profit
and Gross Margin to Adjusted Gross Profit and Adjusted Gross
Margin, (3) GAAP Operating Income and Operating Margin to Adjusted
Operating Income and Adjusted Operating Income Margin and (4) GAAP
Net Income Per Diluted Share to Adjusted Net Income Per Diluted
Share are as follows (unaudited in millions, except per share
amounts):
|
|
Three Months Ended September 30, |
|
Twelve Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Reported Revenues |
$ |
286.1 |
|
|
$ |
281.9 |
|
|
$ |
1,123.1 |
|
|
$ |
1,120.8 |
|
Italian
payback measure (1) |
|
4.1 |
|
|
|
— |
|
|
|
4.1 |
|
|
|
— |
|
Adjusted Revenues |
$ |
290.2 |
|
|
$ |
281.9 |
|
|
$ |
1,127.2 |
|
|
$ |
1,120.8 |
|
|
|
|
|
|
|
|
|
GAAP Gross Profit |
$ |
173.8 |
|
|
$ |
181.8 |
|
|
$ |
735.2 |
|
|
$ |
749.9 |
|
GAAP Gross Profit Margin |
|
60.7 |
% |
|
|
64.5 |
% |
|
|
65.5 |
% |
|
|
66.9 |
% |
Stock-based compensation expense (2) |
|
0.1 |
|
|
|
— |
|
|
|
0.3 |
|
|
|
0.1 |
|
Amortization of intangible assets (3) |
|
0.3 |
|
|
|
0.8 |
|
|
|
1.1 |
|
|
|
1.2 |
|
Italian
payback measure (1) |
|
4.1 |
|
|
|
— |
|
|
|
4.1 |
|
|
|
— |
|
Adjusted Gross Profit |
$ |
178.3 |
|
|
$ |
182.6 |
|
|
$ |
740.7 |
|
|
$ |
751.2 |
|
Adjusted Gross Profit Margin |
|
61.4 |
% |
|
|
64.8 |
% |
|
|
65.7 |
% |
|
|
67.0 |
% |
|
|
|
|
|
|
|
|
GAAP Operating Income |
$ |
26.2 |
|
|
$ |
25.8 |
|
|
$ |
166.8 |
|
|
$ |
221.5 |
|
GAAP Operating Income Margin |
|
9.2 |
% |
|
|
9.2 |
% |
|
|
14.9 |
% |
|
|
19.8 |
% |
Amortization of intangible assets (3) |
|
0.3 |
|
|
|
0.8 |
|
|
|
1.1 |
|
|
|
1.2 |
|
One-time
stand up costs (4) |
|
27.5 |
|
|
|
31.8 |
|
|
|
112.5 |
|
|
|
93.7 |
|
EU MDR
(5) |
|
0.2 |
|
|
|
0.6 |
|
|
|
0.5 |
|
|
|
1.3 |
|
Stock-based compensation expense (6) |
|
1.2 |
|
|
|
1.1 |
|
|
|
4.5 |
|
|
|
5.7 |
|
Impairment losses (7) |
|
— |
|
|
|
2.5 |
|
|
|
— |
|
|
|
2.5 |
|
Business
optimization and severance related costs (8) |
|
1.7 |
|
|
|
2.6 |
|
|
|
7.4 |
|
|
|
5.6 |
|
Italian
payback measure (1) |
|
4.1 |
|
|
|
— |
|
|
|
4.1 |
|
|
|
— |
|
Adjusted Operating Income |
$ |
61.2 |
|
|
$ |
65.2 |
|
|
$ |
296.9 |
|
|
$ |
331.5 |
|
Adjusted Operating Income Margin |
|
21.1 |
% |
|
|
23.1 |
% |
|
|
26.3 |
% |
|
|
29.6 |
% |
|
|
|
|
|
|
|
|
GAAP Net Income |
$ |
14.6 |
|
|
$ |
6.0 |
|
|
$ |
78.3 |
|
|
$ |
70.4 |
|
Adjustments: |
|
|
|
|
|
|
|
GAAP Income tax provision (benefit) |
|
(21.6 |
) |
|
|
(1.0 |
) |
|
|
(34.1 |
) |
|
|
35.3 |
|
Amortization of intangible assets (3) |
|
0.3 |
|
|
|
0.8 |
|
|
|
1.1 |
|
|
|
1.2 |
|
One-time stand up costs (4) |
|
27.5 |
|
|
|
31.8 |
|
|
|
112.5 |
|
|
|
93.7 |
|
EU MDR (5) |
|
0.2 |
|
|
|
0.6 |
|
|
|
0.5 |
|
|
|
1.3 |
|
Stock-based compensation expense (6) |
|
1.2 |
|
|
|
1.1 |
|
|
|
4.5 |
|
|
|
5.7 |
|
Impairment losses (7) |
|
— |
|
|
|
2.5 |
|
|
|
— |
|
|
|
2.5 |
|
Business optimization and severance related costs (8) |
|
1.7 |
|
|
|
2.6 |
|
|
|
7.4 |
|
|
|
5.6 |
|
Italian payback measure (1) |
|
4.1 |
|
|
|
— |
|
|
|
4.1 |
|
|
|
— |
|
Deferred jurisdiction adjustments in Other income (expense), net
for taxes (9) |
|
0.6 |
|
|
|
(4.7 |
) |
|
|
4.6 |
|
|
|
8.4 |
|
Non-GAAP Income tax provision (10) |
|
(2.7 |
) |
|
|
(5.6 |
) |
|
|
(35.8 |
) |
|
|
(51.5 |
) |
Adjusted Net Income |
$ |
25.9 |
|
|
$ |
34.1 |
|
|
$ |
143.1 |
|
|
$ |
172.6 |
|
|
|
|
|
|
|
|
|
GAAP Net Income per Diluted share |
$ |
0.25 |
|
|
$ |
0.10 |
|
|
$ |
1.34 |
|
|
$ |
1.22 |
|
Adjusted Net Income per Diluted share |
$ |
0.45 |
|
|
$ |
0.59 |
|
|
$ |
2.45 |
|
|
$ |
2.99 |
|
|
|
|
|
|
|
|
|
Diluted weighted-average shares outstanding (in
thousands) |
|
58,122 |
|
|
|
57,473 |
|
|
|
58,326 |
|
|
|
57,758 |
|
(1) |
|
Reflects the recognition of incremental Italian payback accruals
resulting from the two July 22, 2024 rulings by the Constitutional
Court of Italy relating to certain prior years since 2015 recorded
in Revenues. |
(2) |
|
Represents stock-based
compensation expense recognized during the period associated with
the incremental value of converted legacy BD share-based awards and
sign-on equity awards granted to certain members of the embecta
leadership team in connection with the Separation from BD recorded
in Cost of products sold. |
(3) |
|
Amortization of intangible assets
is recorded in Cost of products sold. |
(4) |
|
One-time stand-up costs incurred
primarily include: (i) product registration and labeling costs;
(ii) manufacturing, 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
September 30, 2024, approximately $27.3 million and
$0.2 million are recorded in Other operating expenses and
Selling and administrative expense, respectively. For the twelve
months ended September 30, 2024, approximately
$111.2 million and $1.3 million are recorded in Other
operating expenses and Selling and administrative expense,
respectively. For the three months ended September 30, 2023,
approximately $31.6 million and $0.2 million are recorded in Other
operating expenses and Selling and administrative expense,
respectively. For the twelve months ended September 30, 2023,
approximately $92.7 million and $1.0 million are recorded in Other
operating expenses and Selling and administrative expense,
respectively. |
(5) |
|
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. |
(6) |
|
Represents stock-based
compensation expense recognized during the period associated with
the incremental value of converted legacy BD share-based awards and
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 September 30, 2024, $1.1 million is
recorded in Selling and administrative expense and $0.1 million is
recorded in Cost of products sold. For the twelve months ended,
September 30, 2024, $4.1 million is recorded in Selling and
administrative expense, $0.1 million is recorded in Research and
development expense, and $0.3 million is recorded in Cost of
products sold. For the three months ended September 30, 2023,
$1.0 million is recorded in Selling and administrative expense
and $0.1 million is recorded in Research and development
expense. For the twelve months ended September 30, 2023,
$5.4 million is recorded in Selling and administrative
expense, $0.1 million is recorded in Cost of products sold, and
$0.2 million is recorded in Research and development
expense. |
(7) |
|
Relates to impairment charges
incurred related to the abandonment of certain manufacturing
equipment in China that is no longer in use that was inherited as
part of the Separation from BD. The impairment charges are recorded
in Impairment Expense. |
(8) |
|
Represents business optimization
and severance related costs associated with standing up the
organization recorded in Other operating expenses. |
(9) |
|
Represents amounts due to BD for
tax liabilities incurred in deferred jurisdictions where BD is
considered the primary obligor. |
(10) |
|
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 rate for the three and
twelve months ended September 30, 2024 were 9% and 20%,
respectively. The non-GAAP effective tax rates for the three and
twelve months ended September 30, 2023 were 14% and 23%,
respectively. |
|
|
|
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, and
Instagram.
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 and achievements.
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," "plans," "intends", “pursue”, “will”, “may” or similar
expressions, we are making forward-looking statements. For example,
embecta is using forward-looking statements when it discusses its
plans to discontinue its patch pump program, concentrate its
resources on its core business, prioritize free cash flow towards
paying down debt, and create financial flexibility for future
investments, its ability to reduce costs, streamline operations and
enhance profitability, its expected savings and expenses from its
organizational restructuring and the timing thereof, its fiscal
2025 financial guidance and its expectations with respect to
strengthening its base business, separating and standing up embecta
as an independent company, and investing in growth, and geographic
expansion of 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 extend or replace the services
provided by BD under the 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, 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) expectations related to the costs, profitability,
timing and the estimated financial impact of, and charges and
savings associated with, the restructuring plan we announced; (xvi)
risks associated with not completing strategic collaborative
partnerships and acquisitions for innovative technologies,
complementary product lines, and new markets; and (xvii) 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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