Embecta Corp.

Previous wording

Commoditization of Injection Devices. Given the growing demand for medical devices to assist in the treatment of diabetes and difficulties around access to diabetes care due to complex and costly insurance plans, patient care is increasingly focused on providing more affordable products, which has led to the commoditization of more traditional injection delivery devices, such as insulin syringes and pen needles. Existing and new local and regional low-cost providers, in combination with a shift from insulin vials to insulin pens, have made the pen needle category highly competitive. This has forced providers to provide clinical evidence to differentiate their products.

Current wording

Commoditization of Injection Devices. Given the growing demand for medical devices to assist in the treatment of diabetes and difficulties around access to diabetes care due to complex and costly insurance plans, patient care is increasingly focused on providing more affordable products, which has led to the commoditization of more traditional injection delivery devices, such as insulin syringes and pen needles. Existing and new local and regional low-cost providers, in combination with a shift from insulin vials to insulin pens, have made the pen needle category highly competitive.

Previous wording

Global Trade. The current global economic environment has been recently influenced by rapidly changing new tariff policies instituted by the United States ("U.S.") government and foreign governments. As a global company that both imports raw materials and products into the U.S. and distributes products and raw materials originating from the U.S. to global manufacturing sites and markets, these new tariffs may have a financial impact on our cost of goods, our profit margins, our business generally and our global distribution strategy. These new tariffs have also caused foreign governments and private purchasers to consider transitioning away from products originating from certain countries (including the U.S.) in favor of buying “local” products, which may impact the company’s business and operations.

Current wording

Global Trade. The current global economic environment has been recently influenced by rapidly changing new tariff policies instituted by the United States ("U.S.") government and foreign governments. As a global company that both imports raw materials and products into the U.S. and distributes products and raw materials originating from the U.S. to global manufacturing sites and markets, these new tariffs may have a financial impact on our cost of goods, our profit margins, our business generally and our global distribution strategy. These new tariffsmay cause foreign governments and private purchasers to consider transitioning away from products originating from certain countries (including the U.S.) in favor of buying “local” products resulting in the additional possibility that local manufacturers, brands and other competitors may engage in aggressive competitive pricing to take advantage of the uncertain global trade environment and transition customers away from global manufacturers, all of which may impact the company’s business and operations.

Previous wording

We continue to face increases in the cost and disrupted availability of raw materials, components, and other inputs necessary to manufacture and distribute our products due to constraints and inflation within the global supply chain, as well as increases in the cost and time to distribute our products. To date we have been able to successfully mitigate this disruption and provide uninterrupted supply to our customers by increasing our inventory levels and taking other measures. Given our global business, we expect recently announced tariffs will result in additional cost for us and our suppliers as well as influencing potential future decisions by foreign governments and private purchasers to source non-U.S., “locally” manufactured products instead of products originating from certain countries (including the U.S.). We will continue to monitor the evolving tariff environment and we will focus on optimizing operations and leveraging existing strategies to reduce the impact from tariffs.

Current wording

We continue to face increases in the cost and disrupted availability of raw materials, components, and other inputs necessary to manufacture and distribute our products due to constraints and inflation within the global supply chain, as well as increases in the cost and time to distribute our products. To date we have been able to successfully mitigate this disruption and provide uninterrupted supply to our customers by increasing our inventory levels and taking other measures. Given our global business, we expect recently announced tariffs will result in additional cost for us and our suppliers, and there is the potential that such tariffs may influence future decisions by foreign governments and private purchasers to source non-U.S., “locally” manufactured products instead of products originating from certain countries (including the U.S.) and that local manufacturers, brands and other competitors may engage in aggressive competitive pricing or other strategies to take advantage of the uncertain global trade environment and transition customers away from global manufacturers. We will continue to monitor the evolving tariff environment and we will focus on optimizing operations and leveraging existing strategies to reduce the impact from tariffs.

Previous wording

On November 22, 2024, the Company's Board of Directors approved a plan to discontinue internal and external investment in the research and development of our patch pump program. Restructuring actions associated with the Patch Pump Restructuring Plan to discontinue the patch pump program are substantially complete as of March 31, 2025. Total cumulative pretax costs to be incurred by the Company to implement the Patch Pump Restructuring Plan are estimated to be between $30.0 million to $40.0 million. In addition, we discontinued our commercial operation plans for the insulin delivery system, including the previous intended limited launch. The Company plans to refocus its investment on its core business while looking to optimize free cash flow and strengthen its balance sheet by paying down debt.

Current wording

On November 22, 2024, the Company's Board of Directors approved a plan to discontinue internal and external investment in the research and development of our patch pump program. As a result, the Company incurred organizational restructuring plan (the "Patch Pump Restructuring Plan") costs of $34.3 million during the nine months ended June 30, 2025. Restructuring actions associated with the Patch Pump Restructuring Plan to discontinue the patch pump program are substantially complete as of June 30, 2025. In addition, we discontinued our commercial operation plans for the insulin delivery system, including the previous intended limited launch. The Company plans to refocus its investment on its core business while looking to optimize free cash flow and strengthen its balance sheet by paying down debt.

Previous wording

During the second quarter of fiscal 2025, the Company initiated restructuring actions in connection with the 2025 Restructuring Plan to streamline the organization and optimize resources. The Company expects the 2025 Restructuring Plan to be substantially completed by the end of fiscal year 2025. Total cumulative pretax costs to be incurred by the Company to implement the 2025 Restructuring Plan are estimated to be between $4.0 million to $5.0 million.

Current wording

During the second quarter of fiscal 2025, the Company initiated restructuring actions in connection with the 2025 Restructuring Plan to streamline the organization and optimize resources. As a result, the Company incurred organizational restructuring plan costs of $3.5 million during the nine months ended June 30, 2025. The 2025 Restructuring Plan is substantially complete as of June 30, 2025.

Previous wording

We continue to monitor the conflict in Ukraine and the associated sanctions and other restrictions. We also are monitoring the Israel-Hamas war and Houthi attacks on commercial shipping vessels and other naval vessels. As of May 9, 2025, there is no material impact to our business operations and financial performance as a result of the aforementioned conflicts. However, the full impact of the conflicts on our business operations and financial performance remains uncertain and will depend on future developments, including the severity and duration of the conflicts and their impact on regional and global economic conditions. We will continue to monitor these conflicts and assess the related restrictions and other effects on our business.

Current wording

We continue to monitor the conflict in Ukraine and the associated sanctions and other restrictions. We also are monitoring the conflicts in the Middle East and Houthi attacks on commercial shipping vessels and other naval vessels. As of August 8, 2025, there is no material impact to our business operations and financial performance as a result of the aforementioned conflicts. However, the full impact of the conflicts on our business operations and financial performance remains uncertain and will depend on future developments, including the severity and duration of the conflicts and their impact on regional and global economic conditions. We will continue to monitor these conflicts and assess the related restrictions and other effects on our business.

Previous wording

•Gross profit decreased by $50.1 million to $321.2 million, from $371.3 million. Gross profit as a percent of revenue was 61.7%, as compared to 65.8% in the prior year comparative period;

Current wording

•Gross profit increased by $7.0 million to $197.1 million from $190.1 million. Gross profit as a percent of revenue was 66.7%, as compared to 69.8% in the prior year comparative period;

Previous wording

Six Months Ended March 31, 2025 Summary (on a comparative basis)

Current wording

Nine Months Ended June 30, 2025 Summary (on a comparative basis)

Previous wording

Key financial results for the six months ended March 31, 2025 were as follows:

Current wording

Key financial results for the nine months ended June 30, 2025 were as follows:

Previous wording

•Gross profit decreased by $21.3 million to $164.1 million from $185.4 million. Gross profit as a percent of revenue was 63.4%, as compared to 64.6% in the prior year comparative period;

Current wording

•Gross profit decreased by $43.1 million to $518.3 million, from $561.4 million. Gross profit as a percent of revenue was 63.5%, as compared to 67.1% in the prior year comparative period;

Previous wording

Our revenues decreased by $28.2 million, or 9.8%, to $259.0 million for the three months ended March 31, 2025 as compared to revenues of $287.2 million for the three months ended March 31, 2024. 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 $26.6 million of unfavorable changes in volume and $6.0 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 $2.5 million of favorable changes in price and a $1.9 million increase in contract manufacturing revenues related to sales of non-diabetes products to BD.

Current wording

Our revenues increased by $23.0 million, or 8.4%, to $295.5 million for the three months ended June 30, 2025 as compared to revenues of $272.5 million for the three months ended June 30, 2024. 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 increase in revenues was driven by $13.5 million of favorable changes in volume, $6.8 million of favorable changes in price, a $1.7 million increase in contract manufacturing revenues related to sales of non-diabetes products to Becton, Dickinson and Company ("BD"), and $1.0 million associated with the positive impact of foreign currency translation primarily due to the weakening of the U.S. dollar.

Previous wording

Our revenues decreased by $43.6 million, or 7.7%, to $520.9 million for the six months ended March 31, 2025 as compared to revenues of $564.5 million for the six months ended March 31, 2024. The decrease in revenues was driven by $44.5 million of unfavorable changes in volume and $8.0 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 a $4.8 million increase in contract manufacturing revenues related to sales of non-diabetes products to BD and $4.1 million of favorable changes in price.

Current wording

Our revenues decreased by $20.6 million, or 2.5%, to $816.4 million for the nine months ended June 30, 2025 as compared to revenues of $837.0 million for the nine months ended June 30, 2024. The decrease in revenues was driven by $31.0 million of unfavorable changes in volume and $7.0 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 $10.9 million of favorable changes in price and $6.5 million increase in contract manufacturing revenues related to sales of non-diabetes products to BD.

Previous wording

Cost of products sold decreased by $6.9 million, or 6.8%, to $94.9 million for the three months ended March 31, 2025 as compared to $101.8 million for the three months ended March 31, 2024. Cost of products sold as a percentage of revenues was 36.6% for the three months ended March 31, 2025 as compared to 35.4% for the three months ended March 31, 2024. The decrease in cost of products sold for the three month comparative period was primarily driven by lower volumes partially offset by the impact of net changes in profit in inventory adjustments period over period.

Current wording

Cost of products sold increased by $16.0 million, or 19.4%, to $98.4 million for the three months ended June 30, 2025 as compared to $82.4 million for the three months ended June 30, 2024. Cost of products sold as a percentage of revenues was 33.3% for the three months ended June 30, 2025 as compared to 30.2% for the three months ended June 30, 2024. The increase in cost of products sold for the three month comparative period was primarily driven by higher volumes and the impact of net changes in profit in inventory adjustments period over period.

Previous wording

Cost of products sold increased by $6.5 million, or 3.4%, to $199.7 million for the six months ended March 31, 2025 as compared to $193.2 million for the six months ended March 31, 2024. Cost of products sold as a percentage of revenues was 38.3% for the six months ended March 31, 2025 as compared to 34.2% in the six months ended March 31, 2024. The increase in cost of products sold for the six month comparative period was primarily driven by the impact of net changes from profit in inventory adjustments period over period and a non-cash asset impairment charge recorded in the first quarter of fiscal year 2025 to write down the carrying value of certain property and equipment as a result of the Company's Patch Pump Restructuring Plan. This was partially offset by lower volumes in the current period compared to the prior year period.

Current wording

Cost of products sold increased by $22.5 million, or 8.2%, to $298.1 million for the nine months ended June 30, 2025 as compared to $275.6 million for the nine months ended June 30, 2024. Cost of products sold as a percentage of revenues was 36.5% for the nine months ended June 30, 2025 as compared to 32.9% in the nine months ended June 30, 2024. The increase in cost of products sold for the nine month comparative period was primarily driven by the impact of net changes from profit in inventory adjustments period over period and non-cash asset impairment charges recorded to write down the carrying value of certain property and equipment as a result of the Company's Patch Pump Restructuring Plan. This was partially offset by lower volumes in the current period compared to the prior year period.

Previous wording

Selling and administrative expenses decreased by $12.7 million, or 13.8%, to $79.6 million for the three months ended March 31, 2025 as compared to $92.3 million for the three months ended March 31, 2024. Selling and administrative expenses decreased by $21.9 million, or 12.0%, to $160.7 million for the six months ended March 31, 2025 as compared to $182.6 million for the six months ended March 31, 2024. The decrease for both the three and six month comparative periods was primarily driven by lower TSA and LSA costs with BD in addition to lower compensation and marketing expense recognized in the current periods.

Current wording

Selling and administrative expenses decreased by $1.3 million, or 1.5%, to $84.4 million for the three months ended June 30, 2025 as compared to $85.7 million for the three months ended June 30, 2024. Selling and administrative expenses decreased by $23.2 million, or 8.6%, to $245.1 million for the nine months ended June 30, 2025 as compared to $268.3 million for the nine months ended June 30, 2024. The decrease for both the three and nine month comparative periods was primarily driven by lower TSA and LSA costs with BD in addition to lower compensation expense recognized in the current periods.

Previous wording

Research and development expenses decreased by $10.4 million, or 56.5%, to $8.0 million for the three months ended March 31, 2025 as compared to $18.4 million for the three months ended March 31, 2024. Research and development expenses decreased by $10.3 million, or 26.7%, to $28.3 million for the six months ended March 31, 2025 as compared to $38.6 million for the six months ended March 31, 2024. The decrease for both the three and six month comparative periods was primarily driven by a reduction in payments made in connection with the development of our insulin patch pump program in the current periods as compared to the prior periods, given the discontinuation of the patch pump program. We expect our research and development expenses to decrease sequentially in fiscal year 2025 compared to fiscal year 2024.

Current wording

Research and development expenses decreased by $16.0 million, or 78.4%, to $4.4 million for the three months ended June 30, 2025 as compared to $20.4 million for the three months ended June 30, 2024. Research and development expenses decreased by $26.3 million, or 44.6%, to $32.7 million for the nine months ended June 30, 2025 as compared to $59.0 million for the nine months ended June 30, 2024. The decrease for both the three and nine month comparative periods was primarily driven by a reduction in payments made in connection with the development of our insulin patch pump program in the current periods as compared to the prior periods, given the discontinuation of the patch pump program. We expect our research and development expenses to decrease sequentially in fiscal year 2025 compared to fiscal year 2024.

Previous wording

Interest expense, net decreased by $1.1 million to $26.7 million for the three months ended March 31, 2025 as compared to $27.8 million for the three months ended March 31, 2024. Interest expense, net decreased by $0.9 million to $54.6 million for the six months ended March 31, 2025 as compared to $55.5 million for the six months ended March 31, 2024. The change for both periods was relatively flat. It remains unclear whether the United States Federal Reserve will increase or decrease the benchmark interest rate during the remainder of fiscal 2025. An increase in the benchmark interest rate would result in an increase in interest expense on our variable rate debt and a decrease in the benchmark interest rate would result in a decrease in interest expense on our variable rate debt.

Current wording

Interest expense, net decreased by $1.2 million to $26.6 million for the three months ended June 30, 2025 as compared to $27.8 million for the three months ended June 30, 2024. Interest expense, net decreased by $2.1 million to $81.2 million for the nine months ended June 30, 2025 as compared to $83.3 million for the nine months ended June 30, 2024. The decrease for both the three and nine month comparative periods was primarily driven by lower debt levels and lower short-term interest rates in the current periods as compared to the prior periods. It remains unclear whether the United States Federal Reserve will increase or decrease the benchmark interest rate during the remainder of fiscal 2025. An increase in the benchmark interest rate would result in an increase in interest expense on our variable rate debt and a decrease in the benchmark interest rate would result in a decrease in interest expense on our variable rate debt.

Previous wording

Other income (expense), net, was $(0.4) million and $(1.5) million for the three months ended March 31, 2025 and 2024, respectively. Other income (expense), net was $(1.9) million and $(5.0) million for the six months ended March 31, 2025 and 2024, respectively. The costs incurred for the three and six month periods ended March 31, 2025 are primarily attributed to unfavorable impacts from foreign exchange. The costs incurred for the three and six month periods ended March 31, 2024, are primarily attributed to amounts due to BD for income taxes payable incurred in deferred jurisdictions where BD is considered the primary obligor. We do not expect to incur any additional amounts where BD is considered the primary obligor in the current fiscal year.

Current wording

Other income (expense), net, was $4.8 million and $(1.1) million for the three months ended June 30, 2025 and 2024, respectively. Other income (expense), net was $2.9 million and $(6.1) million for the nine months ended June 30, 2025 and 2024, respectively. The income generated for the three and nine month periods ended June 30, 2025 was primarily attributed to favorable impacts from foreign exchange. The costs incurred for the three and nine month periods ended June 30, 2024, was primarily attributed to amounts due to BD for income taxes payable incurred in deferred jurisdictions where BD is considered the primary obligor and the unfavorable impacts from foreign exchange. We do not expect to incur any additional amounts where BD is considered the primary obligor in the current fiscal year.

Previous wording

The effective tax rates were 34.4% and (191.9)% for the three months ended March 31, 2025 and 2024, respectively. The increase in the Company's effective tax rate compared to the prior period is primarily due to the absence of non-recurring tax benefits recognized in the prior period related to withholding taxes on undistributed foreign earnings and tax reserves, partially offset by favorable tax impacts primarily resulting from overall higher earnings reflected in the current period.

Current wording

The effective tax rates were 37.0% and 45.6% for the three months ended June 30, 2025 and 2024, respectively. The decrease in the Company's effective tax rate compared to the prior period is primarily due to favorable tax impacts resulting from overall higher earnings reflected in the current period. This was partially offset by higher taxes on undistributed foreign earnings and reduced tax benefits from non-taxable income.

Previous wording

The effective tax rates were 33.0% and (102.5)% for the six months ended March 31, 2025 and 2024, respectively. The increase in the Company's effective tax rate compared to the prior period is primarily due to the absence of non-recurring tax benefits recognized in the prior period related to withholding taxes on undistributed foreign earnings, Swiss tax law changes and tax reserves, partially offset by favorable tax impacts primarily resulting from overall higher earnings reflected in the current period.

Current wording

The effective tax rates were 35.7% and (24.4)% for the nine months ended June 30, 2025 and 2024, respectively. The increase in the Company's effective tax rate compared to the prior period is primarily due to the absence of non-recurring tax benefits recognized in the prior period related to withholding taxes on undistributed foreign earnings, Swiss tax law changes and lower tax reserves. This was partially offset by favorable tax impacts primarily resulting from overall higher earnings reflected in the current period.

Previous wording

During thesix months ended March 31, 2025, the Company paid an aggregate principal amount of approximately$59.8 million on the Term Loan, of which$55.0 million was discretionary. Debt extinguishment charges as a result of this discretionary prepayment were not material to the Company's Condensed Consolidated Statements of Income.

Current wording

During the nine months ended June 30, 2025, the Company paid an aggregate principal amount of approximately$112.2 million on the Term Loan, of which$105.0 million was discretionary. Debt extinguishment charges as a result of these discretionary prepayments were not material to the Company's Condensed Consolidated Statements of Income.

Previous wording

During the six months ended March 31, 2025, the Company made interest payments of $52.5 million on debt outstanding.

Current wording

During the nine months ended June 30, 2025, the Company made interest payments of $68.5 million on debt outstanding.

Previous wording

Cash and equivalents and restricted cash were $212.3 million as of March 31, 2025 as compared to $274.2 million as of September 30, 2024.

Current wording

Cash and equivalents and restricted cash were $233.6 million as of June 30, 2025 as compared to $274.2 million as of September 30, 2024.

Previous wording

The primary uses of cash that contributed to the $61.9 million decrease were:

Current wording

The primary uses of cash that contributed to the $40.6 million decrease were:

Previous wording

The change in trade receivables is primarily attributed to the timing of sales.

Current wording

The change in trade receivables is primarily attributed to the timing of sales and receivables factored.

Previous wording

The change in prepaid expenses and other is primarily attributed to payments received from BD associated with the transfer of certain assets and liabilities related to the Diabetes Care Business in certain jurisdictions that closed in the first half of fiscal 2025.

Current wording

The change in prepaid expenses and other is primarily attributed to timing of payments to vendors.

Previous wording

Net cash used for investing activities was comprised of capital expenditures of $1.6 million for the six months ended March 31, 2025 to support our business and operations.

Current wording

Net cash used for investing activities was comprised of capital expenditures of $2.0 million for the nine months ended June 30, 2025 to support our business and operations.

Previous wording

•The risk that as a result of the current global trade environment from the newly instituted tariffs, certain foreign governments, private purchasers and other customers in certain countries may consider transitioning away from products originating from certain countries (including the U.S.) in favor of buying “local” products.

Current wording

•The risk that as a result of the current global trade environment from the newly instituted tariffs, certain foreign governments, private purchasers and other customers in certain countries may consider transitioning away from products originating from certain countries (including the U.S.) in favor of buying “local” products and local manufacturers and competitors may attempt to capitalize on these sentiments and participate in aggressive competitive pricing or other strategies to transition, or divert, current and potential customers away Embecta.