Dev will begin with an assessment of the company's performance during the second quarter and associated financial guidance implications. We will also share the progress we have made on our strategic objectives and will discuss the expected imminent closing of the Owen Mumford acquisition. Jake will then take you through our second quarter financial results in more detail, as well as our updated fiscal year 2026 guidance. Dev will then conclude with our updated approach to capital allocation, and we will open the call for questions.
I want to start the call by addressing our second quarter performance and full-year guidance revision. As a result, we are updating our full-year guidance to account for the underlying factors that impacted performance during the quarter and that we expect to persist for the remainder of the year. Our strategic priorities, along with our recent acquisition of Owen Mumford, will help us get there. While our international business performed in line with our prior outlook, our U.S.
revenue is share loss within our pen needle product category, most of which is concentrated at a single customer. That means that the revenue impact of this switching is estimated to be greater than what is indicated by an average unit price. We believe this contributes to most of the remaining pen needle revenue decline. This is driven by a decline in the retail channel but is being partially mitigated by growth in the long-term care channel.
What went well
- International business performed in line with prior outlook, with revenue of approximately $126 million, up 2.1% on a reported basis; strength continued across Latin America, Asia, and Canada.
- More than 75% of Embecta revenue is now represented by products commercially launched and shipped under the Embecta label, on track for substantial completion by end of calendar year 2026.
- GLP-1 B2B pipeline advanced: approximately 40% of identified partners are now in active contract negotiations or have executed agreements, up from more than one-third the prior quarter.
- Several partners launched generic GLP-1 therapies co-packaged with Embecta pen needles in India, described as a meaningful proof point of the B2B value proposition.
- Partners received Canadian approval and the first U.S. FDA tentative approval for a generic semaglutide injection product.
- Small pack GLP-1 retail configuration launched in Canada and Australia, with U.S. extension expected in coming months.
- Market-appropriate syringes launched commercially in China, with active regulatory submissions for new pen needles under review by U.S. FDA, Brazilian authorities, and BSI for CE mark.
- Repaid approximately $75 million of Term Loan B principal in the first six months; last 12 months net leverage approximately 3x against a covenant of below 4.75x.
- Generated approximately $47 million in free cash flow during the six-month period ended March 31, 2026.
What went wrong
- Consolidated revenue declined 14.4% year-over-year as-reported and 17.4% on an adjusted constant currency basis; CEO called it a difficult quarter with results below expectations.
- U.S. revenue of approximately $95 million declined 29.4% on an adjusted constant currency basis.
- Pen needle share loss concentrated at a single customer, deeper than anticipated, with additional losses across smaller regional and independent pharmacy customers; revenue impact greater than indicated by average unit price because affected patients are largely not on preferred payer plans.
- Overall market volume softness for insulin pens and pen needles in the retail channel, with signs of decline in overall insulin pen prescriptions.
- Pen needle revenue declined 20.4%, syringe revenue declined 14.6%, safety products declined 2.3%, and contract manufacturing revenue declined 43.2% on an adjusted constant currency basis.
- GAAP net loss of $4.1 million ($0.07 loss per diluted share) versus GAAP net income of $23.5 million ($0.40 per share) in the prior year; adjusted EPS of $0.27 versus $0.70 prior year.
- Adjusted gross margin fell to 59.4% from 63.7%, and adjusted operating margin fell to 21.9% from 31.4% year-over-year.
- Discontinued alcohol swab products after the sole API supplier exited and no FDA-qualified alternate could be sourced, removing approximately $5 million of revenue.
- Syringe declines, most stemming from lower syringe use associated with compounded drugs, accounted for approximately $13 million of the guidance reduction.
- China revenue was lower than the prior year period given ongoing market dynamics and the geopolitical and trade environment.
Guidance Changes
| Metric | Period | Current guidance |
|---|
| — | — | — |
| — | — | — |
| — | — | — |
| — | — | — |
| — | — | — |
| — | — | — |
| — | — | — |
| — | — | — |
| — | — | — |
| — | — | — |
| — | — | — |
| — | — | — |
Performance Breakdown
| Metric | YoY | Note |
|---|
| — |
— |
— |
| — |
— |
— |
| — |
— |
— |
| — |
— |
— |
| — |
— |
— |
| — |
— |
— |
| — |
— |
— |
| — |
— |
— |
| — |
— |
— |
| — |
— |
— |
| — |
— |
— |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|
| — | — | — | — |
| — | — | — | — |
| — | — | — | — |
| — | — | — | — |
| — | — | — | — |
| — | — | — | — |
| — | — | — | — |
| — | — | — | — |
Reported 2026-05-05 · figures from the Embecta Corp. Q2 2026 earnings call.