"Building on our performance during 2023, embecta delivered strong results for the first quarter of 2024," said
First Quarter Fiscal Year 2024 Financial Highlights:
- Revenues of
$277.3 million , up 0.6% on a reported basis; down 0.3% on a constant currency basisU.S. revenues decreased 0.5% on both a reported and constant currency basis- International revenues increased 1.8% on a reported basis, and were unchanged on a constant currency basis
- Gross profit and margin of
$185.9 million and 67.0%, compared to$188.8 million and 68.5% in the prior year period - Adjusted gross profit and margin of
$186.3 million and 67.2%, compared to$188.9 million and 68.5% in the prior year period - Operating income and margin of
$45 .5 million and 16.4%, compared to$88 .8 million and 32.2% in the prior year period - Adjusted operating income and margin of
$77 .5 million and 27.9%, compared to$101.6 million and 36.9% in the prior year period - Net income and earnings per diluted share of
$20.1 million and$0.35 , compared to$35.2 million and$0.61 in the prior year period - Adjusted net income and adjusted earnings per diluted share of
$35 .3 million and$0.61 , compared to$55.4 million and$0.96 in the prior year period - Adjusted EBITDA and margin of
$90.4 million and 32.6%, compared to$110.2 million and 40.0% in the prior year period - Announced a dividend of
$0.15 per share
Strategic Highlights:
- Strengthen the base business
- Six embecta abstracts accepted as posters to be presented at Advanced Technologies & Treatments for Diabetes ("ATTD") 2024 conference in
Florence in March - embecta industry sponsored symposium at ATTD 2024 in March titled "Unlocking the potential of insulin pumps for personalized type 2 diabetes care"
- Six embecta abstracts accepted as posters to be presented at Advanced Technologies & Treatments for Diabetes ("ATTD") 2024 conference in
- Separate and stand-up
- Completed enterprise resource planning ("ERP") implementation comprising approximately sixty percent of embecta's revenue base, including two of its three manufacturing plants; implemented new shared service capability and distribution infrastructure for
U.S. andCanada - Exited several transition service agreements with
Becton , Dickinson and Company ("BD") - Finalized transfer of
Suzhou, China manufacturing entity and related assets from BD to embecta
- Completed enterprise resource planning ("ERP") implementation comprising approximately sixty percent of embecta's revenue base, including two of its three manufacturing plants; implemented new shared service capability and distribution infrastructure for
- Invest for growth
- Filed 510(k) premarket filing for the open-loop insulin delivery system with the
U.S. Food and Drug Administration ("FDA") - Progressed the development of a type 2 closed loop insulin delivery system utilizing embecta’s proprietary patch pump system, which carries Breakthrough Device Designation from the FDA
- Filed 510(k) premarket filing for the open-loop insulin delivery system with the
First Quarter Fiscal Year 2024 Results:
Revenues by geographic region are as follows:
Three months ended | ||||||||||||||
Dollars in millions | Increase/(decrease) | |||||||||||||
As Reported | Constant Currency | |||||||||||||
2023 | 2022 | $ | % | % | ||||||||||
$ | 148.6 | $ | 149.3 | $ | (0.7 | ) | (0.5)% | (0.5)% | ||||||
International | 128.7 | 126.4 | 2.3 | 1.8 | 0.0 | |||||||||
Total | $ | 277.3 | $ | 275.7 | $ | 1.6 | 0.6 | % | (0.3)% |
The Company's revenues increased by
Fiscal Year 2024 Updated Financial Guidance:
For fiscal year 2024, the Company now expects:
Dollars in millions, except percentages and per share data | Current | Previous(1) | |||
Revenues | |||||
As Reported (%) | (2.4%) - (0.4%) | (3.0%) - (1.0%) | |||
Constant Currency (%) | (2.0%) - 0.0% | (2.0%) - 0.0% | |||
F/X (%) | (0.4)% | ~ (1.0)% | |||
Contract Manufacturing | |||||
Adjusted Gross Margin (%) | 63.0% - 64.0% | 63.0% - 64.0% | |||
Adjusted Operating Margin (%) | 23.75% - 24.75% | 23.75% - 24.75% | |||
Adjusted Earnings per Diluted Share | |||||
Adjusted EBITDA Margin (%) | 29.5% - 30.5% | 29.5% - 30.5% |
(1) Previous guidance was issued on
We are unable to present a quantitative reconciliation of our expected adjusted gross margin, expected adjusted operating margin, 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
As of
The Company’s Board of Directors declared a quarterly cash dividend of
First Quarter Fiscal Year 2024 Earnings Conference Call:
Management will host a conference call at
A webcast replay of the call will be available beginning at
Condensed Consolidated Statements of Income (Unaudited, in millions, except per share data) | |||||||
Three Months Ended | |||||||
2023 | 2022 | ||||||
Revenues | $ | 277.3 | $ | 275.7 | |||
Cost of products sold | 91.4 | 86.9 | |||||
Gross Profit | $ | 185.9 | $ | 188.8 | |||
Operating expenses: | |||||||
Selling and administrative expense | 90.3 | 72.8 | |||||
Research and development expense | 20.2 | 16.9 | |||||
Other operating expenses | 29.9 | 10.3 | |||||
Total Operating Expenses | $ | 140.4 | $ | 100.0 | |||
Operating Income | $ | 45.5 | $ | 88.8 | |||
Interest expense, net | (27.7 | ) | (25.6 | ) | |||
Other income (expense), net | (3.5 | ) | (7.1 | ) | |||
Income Before Income Taxes | $ | 14.3 | $ | 56.1 | |||
Income tax provision (benefit) | (5.8 | ) | 20.9 | ||||
Net Income | $ | 20.1 | $ | 35.2 | |||
Net Income per common share: | |||||||
Basic | $ | 0.35 | $ | 0.62 | |||
Diluted | $ | 0.35 | $ | 0.61 |
Condensed Consolidated Balance Sheets (in millions, except share and per share data) | |||||||
(Unaudited) | |||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 298.7 | $ | 326.5 | |||
Trade receivables, net (net of allowance for doubtful accounts of | 96.1 | 16.7 | |||||
Inventories: | |||||||
Materials | 32.9 | 32.1 | |||||
Work in process | 11.7 | 8.1 | |||||
Finished products | 104.6 | 111.9 | |||||
Total Inventories | $ | 149.2 | $ | 152.1 | |||
Amounts due from | 110.3 | 142.4 | |||||
Prepaid expenses and other | 65.2 | 111.4 | |||||
Total Current Assets | $ | 719.5 | $ | 749.1 | |||
Property, Plant and Equipment, Net | 301.3 | 300.2 | |||||
24.3 | 24.7 | ||||||
Deferred Income Taxes and Other Assets | 172.7 | 140.4 | |||||
Total Assets | $ | 1,217.8 | $ | 1,214.4 | |||
Liabilities and Equity | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 42.1 | $ | 53.5 | |||
Accrued expenses | 122.2 | 118.1 | |||||
Amounts due to | 57.6 | 73.1 | |||||
Salaries, wages and related items | 57.4 | 62.1 | |||||
Current debt obligations | 9.5 | 9.5 | |||||
Current finance lease liabilities | 3.7 | 3.6 | |||||
Income taxes | 34.1 | 33.6 | |||||
Total Current Liabilities | $ | 326.6 | $ | 353.5 | |||
Deferred Income Taxes and Other Liabilities | 60.7 | 57.2 | |||||
Long-Term Debt | 1,592.9 | 1,593.9 | |||||
Non Current Finance Lease Liabilities | 31.1 | 31.5 | |||||
Commitments and Contingencies | |||||||
Common stock, Authorized - 250,000,000 Issued and outstanding - 57,573,497 as of | $ | 0.6 | $ | 0.6 | |||
Additional paid-in capital | 33.4 | 27.9 | |||||
Accumulated deficit | (530.0 | ) | (541.1 | ) | |||
Accumulated other comprehensive loss | (297.5 | ) | (309.1 | ) | |||
Total Equity | (793.5 | ) | (821.7 | ) | |||
Total Liabilities and Equity | $ | 1,217.8 | $ | 1,214.4 |
Condensed Consolidated Statements of Cash Flows (Unaudited, in millions) | |||||||
Three Months Ended | |||||||
2023 | 2022 | ||||||
Operating Activities | |||||||
Net income | $ | 20.1 | $ | 35.2 | |||
Adjustments to net income to derive net cash provided by operating activities: | |||||||
Depreciation and amortization | 8.8 | 7.2 | |||||
Amortization of debt issuance costs | 1.6 | 1.6 | |||||
Amortization of cloud computing arrangements | 0.4 | — | |||||
Stock-based compensation | 7.3 | 5.5 | |||||
Deferred income taxes | (17.0 | ) | 1.4 | ||||
Change in operating assets and liabilities: | |||||||
Trade receivables, net | (78.6 | ) | 3.0 | ||||
Inventories | 4.1 | (14.7 | ) | ||||
Due from/due to | 17.1 | (9.5 | ) | ||||
Prepaid expenses and other | 43.7 | (6.6 | ) | ||||
Accounts payable, accrued expenses and other current liabilities | (15.7 | ) | 19.4 | ||||
Income and other net taxes payable | 4.4 | 18.2 | |||||
Other assets and liabilities, net | (9.3 | ) | (0.3 | ) | |||
$ | (13.1 | ) | $ | 60.4 | |||
Investing Activities | |||||||
Capital expenditures | $ | (2.7 | ) | $ | (4.7 | ) | |
$ | (2.7 | ) | $ | (4.7 | ) | ||
Financing Activities | |||||||
Payments on long-term debt | $ | (2.4 | ) | $ | (2.4 | ) | |
Payments related to tax withholding for stock-based compensation | (2.2 | ) | (2.8 | ) | |||
Payments on finance lease | (0.3 | ) | (0.9 | ) | |||
Dividend payments | (8.6 | ) | — | ||||
$ | (13.5 | ) | $ | (6.1 | ) | ||
Effect of exchange rate changes on cash and cash equivalents | 1.5 | 4.7 | |||||
Net Change in Cash and cash equivalents | $ | (27.8 | ) | $ | 54.3 | ||
Opening Cash and cash equivalents | 326.5 | 330.9 | |||||
Closing Cash and cash equivalents | $ | 298.7 | $ | 385.2 |
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) earnings before interest, taxes, depreciation, and amortization (“EBITDA”), (ii) Adjusted EBITDA and Adjusted EBITDA Margin, (iii) Adjusted Gross Profit and Adjusted Gross Profit Margin, (iv) Constant Currency revenue growth, (v) Adjusted Operating Income and Adjusted Operating Income Margin (vi) Non-GAAP Pre-tax Income 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 month period ended
Three Months Ended | |||||||
2023 | 2022 | ||||||
GAAP Net Income | $ | 20.1 | $ | 35.2 | |||
Interest expense, net | 27.7 | 25.6 | |||||
Income taxes | (5.8 | ) | 20.9 | ||||
Depreciation and amortization | 8.8 | 7.2 | |||||
EBITDA | $ | 50.8 | $ | 88.9 | |||
Stock-based compensation expense(1) | 7.4 | 5.5 | |||||
One-time stand up costs(2) | 28.3 | 10.2 | |||||
European regulatory initiative-related costs ("EU MDR")(3) | 0.2 | 0.2 | |||||
Business optimization and severance related costs(4) | 1.9 | 0.4 | |||||
Deferred jurisdiction adjustments in Other income (expense), net for taxes(5) | 1.4 | 5.0 | |||||
Amortization of cloud computing arrangements(6) | 0.4 | — | |||||
Adjusted EBITDA | $ | 90.4 | $ | 110.2 | |||
Adjusted EBITDA Margin | 32.6 | % | 40.0 | % |
(1) Represents stock-based compensation expense incurred during the three months ended
(2) One-time stand up costs incurred primarily include costs to stand up the Company. For the three months ended
(3) 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.
(4) Represents business optimization and severance related costs associated with standing up the organization recorded in Other operating expenses.
(5) Represents amounts due to BD for tax liabilities incurred in deferred closing jurisdictions where BD is considered the primary obligor.
(6) Represents amortization of implementation costs associated with cloud computing arrangements recognized in Other operating expenses.
For the three month period ended
Three Months Ended | Three Months Ended | ||||||
2023 | 2022 | ||||||
Gross Profit | $ | 185.9 | $ | 188.8 | |||
Gross Profit Margin | 67.0 | % | 68.5 | % | |||
Stock-based compensation expense | 0.1 | — | |||||
Amortization of intangible assets(1) | 0.3 | 0.1 | |||||
Adjusted Gross Profit | $ | 186.3 | $ | 188.9 | |||
Adjusted Gross Profit Margin | 67.2 | % | 68.5 | % | |||
GAAP Operating Income | $ | 45.5 | $ | 88.8 | |||
GAAP Operating Income Margin | 16.4 | % | 32.2 | % | |||
Amortization of intangible assets(1) | 0.3 | 0.1 | |||||
One-time stand up costs(2) | 28.3 | 10.2 | |||||
EU MDR(3) | 0.2 | 0.2 | |||||
Stock-based compensation expense(4) | 1.3 | 1.9 | |||||
Business optimization and severance related costs(5) | 1.9 | 0.4 | |||||
Adjusted Operating Income | $ | 77.5 | $ | 101.6 | |||
Adjusted Operating Income Margin | 27.9 | % | 36.9 | % | |||
Income Before Income Taxes | $ | 14.3 | $ | 56.1 | |||
Adjustments: | |||||||
Amortization of intangible assets(1) | 0.3 | 0.1 | |||||
One-time stand up costs(2) | 28.3 | 10.2 | |||||
EU MDR(3) | 0.2 | 0.2 | |||||
Stock-based compensation expense(4) | 1.3 | 1.9 | |||||
Business optimization and severance related costs(5) | 1.9 | 0.4 | |||||
Deferred jurisdiction adjustments in Other income (expense), net for taxes(6) | 1.4 | 5.0 | |||||
Total Adjustments | $ | 33.4 | $ | 17.8 | |||
Adjusted Pre-Tax Income | $ | 47.7 | $ | 73.9 | |||
Adjusted Taxes on Income | $ | (12.4 | ) | $ | (18.5 | ) | |
Adjusted Net Income | $ | 35.3 | $ | 55.4 | |||
Adjusted Net Income per Diluted share | $ | 0.61 | $ | 0.96 | |||
GAAP Net Income | $ | 20.1 | $ | 35.2 | |||
GAAP Net Income per Diluted share | $ | 0.35 | $ | 0.61 | |||
GAAP and Adjusted Diluted weighted-average shares outstanding (in thousands) | 57,632 | 57,484 |
(1) Amortization of intangible assets is recorded in Cost of products sold.
(2) One-time stand up costs incurred primarily include costs to stand up the Company. For the three months ended
(3) 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.
(4) Represents stock-based compensation expense recognized during the period associated with the incremental value of converted legacy BD share-based awards and one-time sign-on equity awards granted to certain members of the
(5) Represents business optimization and severance related costs associated with standing up the organization recorded in Other operating expenses.
(6) Represents amounts due to BD for tax liabilities incurred in deferred jurisdictions where BD is considered the primary obligor.
Each reporting period, we face currency exposure that arises from translating the results of our worldwide operations to the
For the three month period ended
Three months ended | |||||||||||||
Dollars in millions | 2023 | 2022 | Total Change | Estimated FX Impact | Constant Currency Change | ||||||||
Total Revenues | $ | 277.3 | $ | 275.7 | 0.6 | % | 0.9 | % | (0.3)% |
About
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, Instagram and Twitter.
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, achievements, and anticipated product clearances, approvals and launches. 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,” “intends,” “plans,” “pursue,” “will” or similar expressions, we are making forward-looking statements. For example, embecta is using forward-looking statements when it discusses its fiscal 2024 financial guidance and investing in growth, including advancing the development of our hybrid closed loop insulin delivery system. 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 Transition Services Agreement, the Logistics Services Agreement and other 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
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