What Management Said

Read the full Q4 2025 transcript ↗

Jake will then review the financial results for the Fourth Quarter and Full Year 2025 and share our preliminary thoughts for Fiscal Year 2026. We made the decision to end our Patch Pump Program, and we executed a restructuring plan aimed at enhancing our profitability and free cash flow. With this, 100% of our revenue now flows through our systems, and all TSAs and LSAs that we had at spin have been exited. Together, the completion of these separation and stand-up activities have freed up capacity, which we are now devoting to initiatives that we anticipate will help transition the company towards long-term sustainable growth.

Several of these partners have already signed agreements and placed purchase orders, and our products are included in multiple GLP-1 partner-managed regulatory submissions expected to lead to commercial launches. With leverage now at 2.9 times net debt to adjusted EBITDA, we continue to create financial flexibility to invest in potential organic and inorganic opportunities that can reshape Embecta's long-term growth profile. Now, let's review our revenue performance for the Fourth Quarter and Full Year. During the Fourth Quarter of Fiscal Year 2025, Embecta generated $264 million in revenue, reflecting a 7.7% decline year-over-year on an as-reported basis or a 10.4% decline on an adjusted cost and currency basis.

Within the U.S., revenue for the quarter totaled $142 million, reflecting a year-over-year decline of 15.2% on an adjusted cost and currency basis. The year-over-year decline was primarily driven by an unfavorable comparison to the prior year Fiscal Fourth Quarter, which benefited from additional distributor orders that occurred because of the then looming U.S. Turning to our international business, revenue for the Fourth Quarter totaled $122 million, representing an increase of 2.8% on a reported basis, but a decline of 4% on an adjusted cost and currency basis. The year-over-year decline in pen needle revenue was driven by the same factors that impacted our U.S.

What went well
  • Full year adjusted EPS of $2.95 at the top end of the previously provided guidance range, up from $2.45 in the prior year.
  • Exceeded previously provided fiscal 2025 adjusted gross margin, adjusted operating margin, and adjusted EBITDA margin ranges.
  • Generated approximately $182 million in free cash flow and repaid approximately $184 million of debt, exceeding the original $110 million debt reduction target; net leverage reduced to 2.9x.
  • Completed the multi-year complex stand-up program: own ERP operational, new distribution and shared services in Latin America and India, 100% of revenue flowing through Embecta systems, and all TSAs and LSAs exited.
  • Substantially completed brand transition in North America, with more than 95% of U.S. and Canadian revenue converted to the Embecta brand.
  • Advanced the GLP-1 strategy with more than 30 pharmaceutical partners, several having signed agreements and placed purchase orders, and products included in multiple partner-managed regulatory submissions.
  • Full year adjusted operating income and margin rose to $337.7 million and 31.3%, from $296.9 million and 26.3% prior year.
  • Full year adjusted EBITDA and margin of approximately $415.3 million and 38.5%, up from $353.4 million and 31.4%.
  • Full year syringe revenue grew 1.7%, safety products grew 6.3%, and contract manufacturing grew approximately 53.9%.
  • Executed an agreement to sell certain Patch Pump Program IP and long-lived assets for $10 million (a fiscal 2026 Q1 event).
What went wrong
  • Q4 revenue of $264 million declined 7.7% as-reported and 10.4% on an adjusted constant currency basis.
  • Q4 U.S. revenue of $142 million declined 15.2% adjusted constant currency, against a prior-year Q4 that benefited from ~$10 million of distributor orders ahead of a U.S. port strike and the ~$7 million unwind of favorable July 4 order timing from Q3 2025.
  • Q4 U.S. price was unfavorable by approximately $7 million, primarily due to milestone payments made to a large U.S. pharmacy customer.
  • Q4 international revenue of $122 million declined 4% adjusted constant currency, driven by lower volumes and pricing headwinds in China amid heightened competitive intensity and a growing preference for local Chinese brands.
  • Q4 adjusted constant currency by product: pen needles -13.9%, syringes -4.5%.
  • Full year adjusted revenue declined 3.9% adjusted constant currency to approximately $1.080 billion; full-year U.S. revenue of $579.1 million declined 4.6% and international of $501.3 million declined 3.1%.
  • Full year pen needle revenue declined approximately 7.1% to $784.1 million, reflecting prior-year advanced distributor ordering, lower China revenue, and pricing headwinds.
  • Q4 adjusted gross margin declined to 60.6% from 61.4%, and full year adjusted gross margin declined to 63.7% from 65.7%, driven primarily by increased cannula costs.
  • Q4 adjusted tax rate increased to approximately 25% from approximately 9.5% in Q4 2024; full year adjusted tax rate rose to approximately 25% from approximately 20%.
  • Gross margin has fallen from roughly 67% at spin to just under 64% in 2025, with the entirety of the decline attributed to increased cannula costs from sole-source supplier BD.

Guidance Changes

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Performance Breakdown

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Earnings Call Themes & Trends

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Q&A Summary

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Transcript

Q4 2025 call
Reported 2025-11-25 · figures from the Embecta Corp. Q4 2025 earnings call.

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