Embecta Q1 Earnings Call Highlights

Key Points

• Embecta is shifting from a "stand-up" to a "seed growth" phase, prioritizing stabilization of its core insulin-delivery franchise, selective portfolio expansion, and brand transition (now >95% of U.S./Canada revenue under Embecta) alongside new Part D contracting to protect payer access.
• Q1 fiscal 2026 revenue was about $261 million (down ~2% adjusted constant-currency); U.S. revenue fell ~7.6% from pricing and volume headwinds while international sales grew, and management reaffirmed FY26 guidance but now expects results closer to the low end of the ranges due to incremental U.S. pricing pressure.
• Profitability and deleveraging improved: GAAP net income was $44.1M (adjusted EPS $0.71), the company generated ~$17M free cash flow, repaid ~$38M of debt reducing net leverage to ~2.8x, and plans to repay about $150M of debt and produce $180–200M of FCF in FY26.

Embecta NASDAQ: EMBC said it is transitioning from a “stand-up” phase of independence to a “seed growth” phase as management works to stabilize its core insulin delivery franchise, expand the portfolio, and build financial flexibility. On the company’s fiscal first-quarter 2026 earnings call, executives also reiterated full-year guidance but said they now expect results to land closer to the lower end of their previously issued ranges due primarily to incremental U.S. pricing headwinds.

Strategic roadmap shifts toward “seed growth” priorities

CEO Dev Kurdikar said fiscal year 2025 largely marked the completion of the company’s stand-up phase, highlighted by operationalizing its own ERP, distribution, and shared services infrastructure, migrating revenue into Embecta’s systems, and exiting transition and logistics services agreements. Kurdikar said Embecta completed those initiatives while keeping constant-currency revenue stable.

With that work largely complete, management said the company is now focused on the seed growth phase, which centers on staying competitive in the core business, selectively expanding in areas that leverage existing strengths, and continuing disciplined capital allocation to enhance financial flexibility.

Brand transition and payer access updates

Kurdikar emphasized progress on Embecta’s branding transition, which involves packaging and branding changes to establish the company independently with patients, healthcare professionals, and channel partners. He said more than 95% of U.S. and Canadian revenue has now transitioned to the Embecta brand. The next phase is rolling out internationally, with transitions underway in select markets and most regions expected to be “substantially complete” by the end of calendar year 2026.

Management also highlighted contracting actions in the Medicare Part D channel. Kurdikar said that effective January 2026, Embecta contracted with an additional Part D payer for exclusive access to its products and renewed advantaged formulary access with the top three Part D payers it already served. He said the actions are intended to support stable access and share and improve long-term competitiveness.

Quarterly revenue: U.S. weakness offset by international growth

For the fiscal first quarter of 2026, Embecta reported approximately $261 million in revenue, a 0.3% decline year over year on an as-reported basis and a 2% decline on an adjusted constant-currency basis. Kurdikar said results were largely in line with expectations, driven by international performance.

• U.S. revenue: approximately $131 million, down 7.6% year over year on an adjusted constant-currency basis. Management attributed the decline to lower pricing and lower volumes tied to channel and contractual dynamics, partially offset by order timing.
• International revenue: approximately $130 million, up 8.4% reported and up 4.6% on an adjusted constant-currency basis, driven by strength in EMEA and Latin America. China remained a headwind but was described as largely in line with internal expectations.

On the Q&A portion of the call, Kurdikar said U.S. performance was driven by “lower pricing and lower volume,” with pricing impacted by a different customer and product mix compared with the prior-year quarter. He also said volumes were influenced by channel dynamics, partially offset by advanced purchases ahead of a January 1 price increase.

In China, Kurdikar said Embecta implemented initiatives including reorganizing the sales force and introducing a new pen needle designed to compete with local branded companies. He said these actions are gaining traction, with China expected to remain a year-over-year headwind in the first half and improve in the second half of fiscal 2026.

By product family on an adjusted constant-currency basis, management said pen needle revenue declined about 4.4% while syringe revenue grew about 5.3% and safety product revenue grew about 7.3%. Contract manufacturing revenue declined about 16.7%, which management said was expected due to Becton Dickinson’s continued insourcing of non-diabetes products Embecta manufactures and sells back to BD. Kurdikar also noted U.S. syringe revenue continues to be pressured by a long-term shift in diabetes treatment toward insulin pens.

Profitability, cash flow, and deleveraging

CFO Jake Elguicze reported GAAP gross profit of $161.7 million and gross margin of 61.9%, compared with $151.7 million and 60% a year earlier. On an adjusted basis, gross profit was $163.5 million with a 62.6% margin, roughly flat with the prior year. Elguicze said adjusted gross margin faced headwinds from pricing dynamics and mix, partially offset by manufacturing cost improvement programs and lower manufacturing functional costs.

GAAP operating income was $83.3 million (31.9% margin) versus $28.7 million (11% margin) in the prior year. Adjusted operating income was $79.3 million (30.4% margin), compared with $80.5 million (30.7% margin) a year earlier. Elguicze said the slight decline in adjusted operating income was driven by lower adjusted gross profit and higher R&D expenses tied to projects including market-appropriate pen needles and syringes, a pen injector development program, and efforts to become cannula independent, partially offset by lower SG&A due to a restructuring initiative announced in the middle of fiscal 2025.

GAAP net income was $44.1 million, or $0.74 per diluted share, compared with zero in the prior year period. On an adjusted basis, net income was $42.3 million and adjusted EPS was $0.71, up from $38.3 million and $0.65 a year earlier. Elguicze attributed the adjusted bottom-line improvement to lower interest expense and a lower adjusted tax rate from tax planning activities, partially offset by the operating profit drivers discussed on the call.

Embecta generated approximately $17 million of free cash flow in the quarter, repaid about $38 million of debt, and reduced last-twelve-month net leverage to about 2.8x under its credit facility definition, compared with a covenant requirement of below 4.75x.

GLP-1 initiatives and product pipeline progress

Kurdikar said Embecta is pursuing a GLP-1 strategy that extends its insulin delivery capabilities, including collaboration with more than 30 pharmaceutical partners across various stages of the sales cycle. He said more than one-third of those partners have selected Embecta as a supplier and have either executed contracts or are in negotiations, with several partners signing agreements, placing purchase orders, and including Embecta pen needles in regulatory submissions.

He said partners anticipate initial generic GLP-1 launches in markets including Canada, Brazil, China, and India beginning in calendar year 2026, with additional emerging markets following over time. Management also discussed efforts to expand Embecta-branded small-pack configurations in Canada and select European markets aimed at out-of-pocket customers, including many GLP-1 users.

On questions about oral GLP-1 therapies, Kurdikar said the arrival of oral options was expected and included in assumptions behind the “$100 million-plus” opportunity discussed at the company’s May 2025 Analyst and Investor Day. He cited data and market reports indicating injectables may offer better weight-loss profiles and suggested early prescription trends imply orals are expanding the market by bringing in new patients. He also pointed to branded company pipelines that remain predominantly injectable. Kurdikar additionally noted interest in Eli Lilly’s Zepbound receiving approval for a KwikPen format, which he said could increase demand for pen needles if delivered via pen.

Beyond GLP-1 programs, Kurdikar said Embecta has finalized designs and installed production equipment for “market-appropriate” pen needles and syringes, with manufacturing validation underway as the company progresses toward regulatory submissions and eventual launches. He also said the company has begun early-stage discussions with branded pharmaceutical companies on co-packaging opportunities for drugs in development.

For fiscal 2026, Embecta reaffirmed its guidance, including adjusted constant-currency revenue expected to be flat to down 2% year over year and as-reported revenue of $1.071 billion to $1.093 billion. Elguicze said foreign exchange is still expected to be a 1.2% tailwind and the Italian payback measure remains a roughly 0.1% headwind. Management also reaffirmed adjusted operating margin of 29% to 30% and adjusted EPS of $2.80 to $3.00, but said it now expects to be closer to the low end due to incremental U.S. headwinds in the first half, partially offset by a better international outlook.

Elguicze maintained the company expects to repay about $150 million of debt in fiscal 2026 and generate $180 million to $200 million in free cash flow, also leaning toward the low end. He added that Embecta now expects a slightly more second-half-weighted revenue cadence than previously anticipated, with about 46% of adjusted revenue in the first half and 54% in the second half, reflecting customer mix, competitive intensity, and channel dynamics in the U.S. alongside continued international strength.

About Embecta NASDAQ: EMBC

Embecta Corp NASDAQ: EMBC is a pure-play diabetes care company that was spun off from Becton, Dickinson and Company on July 1, 2021. Headquartered in Franklin Lakes, New Jersey, Embecta focuses exclusively on the development, manufacturing and commercialization of products that enable insulin delivery and blood glucose monitoring for people with diabetes.

The company’s product portfolio includes insulin infusion sets, durable and patch pumps, pen needles, infusion tubing, blood glucose test strips, lancets and lancing devices.

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