EMBC - Earnings call transcript Q2 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Please stand by. Welcome, ladies and gentlemen, to the second quarter of fiscal year 2022 earnings conference call for Embecta Corp. At this time, all participants have been placed in a listen-only mode. Please note that this conference call is being recorded and that the recording will be available on the company's website for replay shortly.

During the call, the company will make forward-looking statements and it is possible actual results could differ from management's expectations. dated factors the cause latest the company's including information other be differences SEC company's and filed the in XXXX, Form found earnings statement Form current uncertainties report that XX.X X-K such could can filings, as on Risks, Exhibit XX, and to XX-Q. February release and

cautioned to place statements as only speak date not undue made. forward-looking You're of which reliance upon the any

turn accompany Executive to Chief of the webcast the go and call year-over-year refers as basis the Dev to the basis may earnings or When voluntarily today's unless from company in to Management Embecta's or would events the do noted forward-looking percent replay period required Please noted. undertakes section laws. whether revise update -GAAP changes period. time, unless applicable calendar also that President period, as by statements, of commitment otherwise like call, it over the Although and our financial and the FX management found new Investor result performance. release time Revenue no financial ahead, all our presentation. on fiscal an otherwise, company's so be a discuss press except are will securities Reconciliations and I a any are to measures future as earnings purchase referring release, neutral be Relations given in details specifically specified, otherwise the relations and comparisons available the they are now regarding website to Kurdikar, investor Officer. relevant accounting www.embecta.com. will of adjustments on the other Unless The slides appendix schedule measures can a GAAP sir. including to Mr. versus period. to details of information,

Devdatt Kurdikar

Kurdikar. And today Jake Officer. My our welcome, I'm second quarter Shannon. Dev Embecta's public name Chief as quarterly everyone, which company. marks Elguicze, earnings I'm first fiscal and joined Embecta CEO also year by a call Embecta's of earnings newly the is XXXX to and call, the Thank President call of you, on Financial

who know, bell are As spin X, on a people colleagues one a former executed would NASDAQ for closing weeks Dickinson. almost at developing for just to the at spinoff day Becton motivating Dickinson you like providing who with and from day thank employees ago. the X,XXX global those we Being dedicated our that about ring was our smoothly, on to team ensure uplifting all mission April of successfully was able six Becton our the to diabetes. all I solutions tirelessly to the worked including executed and for year of

company, with TSAs, an of While we now Becton transition we operating now are under. are services a Dickinson independent series agreements, we that have or

implementing systems recruiting we TSAs. exit the work We setting we in need to have up that people, the of the have begun will and processes place before

ensuring that In uncertainties. including team restrictions, diabetes multiple focus these products continue remains tirelessly addition, our to people Throughout to pressures, globally, use COVID-XX with currently all challenges, inflationary access on that overcome supply and to disruptions, our continues challenges work them. chain geopolitical exists our to have that the

Here's this what remarks to prepared cover our we morning. plan during

of global a competitive earlier would earnings devices then first be thought believe diabetes company. growth and history, public earnings quarter opening which our we as press strengths depth opportunities. the months is our my describing spin a emerged company, a second the quarterly I company's provide we've we of After well as fiscal with for strong, will few release a will Embecta's on call some business injection in from in more first why our results six review today. as stable issued thoughts remarks, introduced we position with As Jake this as guidance our provide XXXX, to a our it minutes in financial financial helpful our you spend and

then We up will X call open the please. for questions. Slide

Let an with diabetes opportunity a world. unique simply, focused truly are me company in organization with we to create who we a are. first Quite the preeminent start

Our mission people our Jake of outside device our have and and and the that focus. joined team live better significant by this make diabetes. life an develop to of business from is built We've medical BD to diabetes. for with industry. to That experience provide advance people life leadership is solutions unlimited a vision in entire I incredible empowering

for our some feels we business the thrilled enduring Our global believe spin, opportunity can merge company and team well. have people same our for strengths. X of to our an X,XXX independent excited with diabetes, know team for this as I'm Post what way please. we with and do customers Slide about this global as will we with I are employees shareholders.

we these believe a geographies. We are best-in-class almost brands capabilities, developed devices our in best-in-class making portfolio We and trusted years. and leader have all XXX with across after products strengths products have for we unmatched

from and name, BD we then, separation As XXXX. the the to keep specialized linkage the a new brand, to have diabetes introduced in treat names we first And to reminder, decided our preparation insulin continued that unrivaled and syringe a have reputation In we've we earn first marketplace. retain is reliability insulin quality the ensure in Embecta, used and for of believe products for taken BD, our in to was logo unchanged. the that to XXXX. Since the care

maintained. over to recognition transition of to next we careful Embecta we our brand As the the that be will couple brand years, is ensure

and brand to where create our addition is reputation, strengths advantages. competitive leadership core the our scale, strength quality based our discussed, on just efficiency and In that I history,

capabilities. have unmatched and distribution sales manufacturing, We

around number are one where distribute a them estimate XX world X we people over annually. by they're almost the and We produce XXX year We injection the of to producer facilities units devices. in three million used billion we countries,

of XXX by our approximately are team Our supported members. commercial efforts globally

in to diabetes XXX around our are with extensive markets. provides we which significant in emerging Taken the capability, is together, along ability we More Furthermore, in employees people markets, vast the diabetes than fact people emerging decades. forward. life a that world. of provide where they have majority strong believe position strong for to occur this especially strength. of proud growth of the commercially begun Slide foundation half our company a been infrastructure with distribution a focused are in reach we presence sales public of has business. expect of that And many number trends with its and as going the over the please. have These X, Embecta in We developed infrastructure, enhanced a our

we in an core and category, business, our Specifically, benefits expanding organization. for has created the spin we strong are have immediate a

Looking seek core for growth, new further foundation and and solid us ahead, to our we opportunities. growth stable these for realize out a have opportunities provides

let walk Now, of you through these me in each depth. more reasons bit a

injection core devices our is of business strong. First,

almost making injection devices for years. selling We and have insulin been XXX

Our have global And unmatched. manufacturing as infrastructure a is noted sales earlier. diverse geographically we network, and I distribution

that Second, large to expanding disease needs. unmet area we in have continues participate and

are provides treatment company, of pure diabetes of the a play condition. that We one chronic a products a handful, for

for the compelling financial we growth. Third, flexibility invest to with a have post profile spin,

enhanced create continue As opportunity and decision attract a provide making agility to the to talent that and a company, will customers. independent newly streamlined drive closer to our we operating model public have

to a why opportunities These identify uniquely Finally, as into and This M&A development for segment, include that believe opportunities. growth. the initiatives, company potential the with we in our partnership as drive is positioned. commercial seeking are program enter well positioned investing to and well infusion is we

Slide to sit stable growth a unmet opportunities needs. business, drive strong have growing which market a core upon We please. large, X, that is and with in

Here X, to the and company chronic completed operational financial XXXX, of portfolio efficient highlights of giving and Embecta BD opportunity achieve strategic operating strategic, resource first to are the during means April the unmet and second care. of spinoff successfully and diabetes planned from occurred need on our XXXX. spin-off by quarter and half the optimize allocation independence, as The more the for from and for address income significant capital common five The and product on basis of March to distribution BD qualified The the for of distribution. shares business federal Embecta's of free held distribution tax issued common the common on one purposes. all stock shareholders every BD shares tax XXXX, for XX, rata outstanding the record of its stock US pro date close share is of Embecta and stock the of a

trading the date, manufacturing XX the spin-off became the of after employee an date ownership manufacturing Regular the completely provide agreements. and under no connection the agreement, transferred agreements an common services the certain began and and a effect Upon supply matters for agreements, Embecta various agreement, symbol, EMBC. commercial In Embecta a completion agreement, separation spin-off, company, and April care on supply interest. BD of to spin-off business retained Embecta. of to into matters relationship agreements, entered stock spin-off, and including reverse way Embecta transition distribution, agreement, other the BD diabetes traded and BD a agreement, a As lease and with spin-off distribution between tax framework ticker the was independent a Embecta of the publicly and

We with We are an in highly outcomes of complications focused innovation driving for focused live are established already for the space, improved foundation presence and who growth solid those have reduction injection the on going we sustainable where and a forward. on creating people diabetes.

an investor discussed patch increase organic we presentation, expand to as total specifically rate. insulin people the our Type long-term designed pre-spin growth As of pump our with Success significantly, such, X an continue in market for development addressable our will there diabetes. and advance

system during with This proprietary when period. have device experts patch breakthrough the us topics say that the US allowed interact delivery with being of We us receive and to efficiently of the opportunity proud review submission an will program offers also the to Type are this pandemic prioritize under allow pre-market phase. X loop FDA. pump FDA's has device utilizing to to made. program us This as to the closed feedback discussions insulin is multiple the breakthrough the review even address our during they developed FDA arise The

supply of geopolitical chain course uncertainties. disruptions, restrictions faced the COVID-XX and pressures, unprecedented team inflationary has Over XXXX, global supply our continuing chain

proud operating are of our execution challenging environment. ability despite We strong the deliver team's to

these results in As the around unfortunately the impacting of Embecta has to companies world. immune been been headwinds doing business widely press, not has reported these are financial either. the

year. restrictions our of results. currency Jake COVID-XX operations, mitigate impacting for Jake? impact discuss to long continuing and to in scope working of exchange pressures our operations, let shipping supply costs allowed impact some the have we fluctuations and in While the to me to expectations rates our our With our are materials, of financial delays, customer over and inflationary along scale results disruption. with are that on and The markets raw QX continue the and foreign minimize us to second suppliers, that, history patient maintain it with continuity half turn the of and of

Jake Elguicze

have as, in you, good we you diabetes world. It with speak to unique focused Dev. about create have morning, next believe the company And Thank to during several preeminent pleasure everyone. years, the that opportunity truly my to we a today opportunity the Embecta is the

Before the for presentation of XXXX, results information would I to XXXX discuss and fiscal of financial background second few quarter XXXX. the and highlight financial quarter some and results I second of regarding for provide the a first the half years like items

has Embecta September a year-end. First, XX

the Embecta's second March fiscal half the first ended and quarter are six results for months for So, and XX. financial three

unaudited, accounting of and and statements Accounting historical principles in managed Accepted historically XXXX carve-out flows the Second, records half Becton Principles. operations, condensed fiscal and of consolidated results interim XXXX business, diabetes the and years position, financial the statements US financial they cash of accounting on first are results as Dickinson. derived of from reflect QX Generally conformity care These with were financial BD's based

these been to do standalone care the a statements incurred Nonetheless, had In are that all have include addition, a statements for shared Embecta were that not financial and the company diabetes historically been basis expenses certain presented. expenses during expenses which corporate BD, on within support of BD centralized include these not segment business. would BD financial allocated periods functions public and actual the general provided

financial guidance of an half Third, an represent XXXX to apples-to-apples half for for guidance release, second second a results today's items evaluation it is as earnings the in expectations forward-looking introduced the on which year historical for I'll financial These company. financial company's in as our press we have the This financial moments. review a fiscal the our bit performance makes of guidance XXXX challenging compared of independent basis. not few

during had XXXX that Embecta's been remarks incurred plan the been Embecta the discussing financial guidance. public periods that on this fact do second the historical Embecta's Given most a include morning standalone results half financial presented, not of focusing company my actual all would have expenses prepared of I

financial Embecta's quickly three and six-month Turning the to performance periods. for

generated as For the in a US decrease revenue primarily profitability. to support decline Embecta on of decline Embecta decline latter several $XXX.X quarter, reported a within due currency customers X.X% Europe. XXXX due represents premium quality, X.X% and of due management of was was brand, decrease term, team length basis. business and clinical second during in currency certain [indiscernible] basis million. constant volume of of This and revenue made to and a The located volume on an the decisions forward the to a longer This constant that portion contract to the to conscious no participate moving considerations, including the reliability

it will cause year-to-date Southeast in basis, temporary million. decrease not X% participate in in volume referred which a increase This X.X% offset by Embecta increase healthier $XXX.X increase earlier. on The basis. the and Europe, business markets The countries a revenue markets, consists represents Africa, on Mainland volume driven certain as China. to Asia, of was XXXX, Latin moving revenue America, volume Middle was East, certain Eastern While somewhat emerging an to decisions within forward. in and well customers basis during experienced currency walk we a these an as constant increase was deliberate by currency the I a to impact On certain from primarily reported emerging a constant Central as creates an away of decisions of

million due and XX.X% improvement $XXX.X margin in the second $XXX.X to The point profit profit totaled margin gross period. impairment charge margin that assets prior-year totaled On $XXX.X with the gross Gross basis, XX.X% Moving margin of basis to and quarter XX progress construction the and were in million This and year-to-date improvement respectively. mix. XXXX. write-off and and in product in million XX.X%, quarter XX.X%, the million gross prior-year profit of to primarily recorded first XXX favorable to margin. This and for gross basis compares due primarily $XX point of $XXX.X XXXX was period. The associated certain in was million a compares and a to respectively. the

year-over-year. margin would impairment improved basis If charge recorded XXXX, in normalize you approximately to the were XX for have gross points

net income. Turning to

second prior million. an spin in million, During in due the marketing totaled mentioned, income driven expense, our second well due traded compares somewhat by basis, an same our prior-year prior in specifically Interest benefit approximately year-to-date investments $XX year-over-year million zero net tax quarter insulin the factors new was XXXX $X increase as and costs approximately in standalone $X in the approximately spin $XXX.X decrease incurred of million $XXX.X On that in of due other a just expenses advertising period, as profit offset a The of the patch expenses $XX impacted of compared million $X results. second This becoming by million. to approximately of a in increased of million the The as to by $XXX.X to of to pump. products, including and operating $X is anticipation and of approximately expense quarter driven net year-to-date This dollars increase gross quarter that the as related decrease and XXXX, and that spend, increase factors, which it to increased income an year. compares as totaled headcount incurred decrease compensation million was admin of including that company, in off. publicly to an I to lower totaled the approximately in in selling that $XX.X increase is a year. development million, combination well is of million in R&D the

XXXX second and $XXX.X Lastly, in months moving XX.X% historical been to that and and million Embecta do approximately compares quarter of million six incurred again, a periods totaled and standalone to been EBITDA during the all I that like XXXX. of I referred include This adjusted Once year-ago for million the XX.X% XX.X% and would and XX.X% It $XXX.X actual and margin. $XXX.X presented. for results the to million company had the the public that to reiterate periods. expenses not just have the financial $XXX.X would

Finally, with and in equivalents cash and respect financial to XXXX, of at approximately million $XXX billion we $X.XX March debt. our condition balance sheet held in quarter-end, and as cash XX,

As created tried sheet as into our and one of opportunities. March approximately of day a ratio of level XX, shareholder financial current organically can investment the we that Effective spin, use the increase And mindful capital our profile, well levels, we we last invest to ended and initial for have of X.X returns. XXXX, XX leverage our both structure need balance leverage the partnership be as use month we business to at and times. as M&A to net stood also

completes in ability Embecta's strong future, my historical shareholders of business intend rates XX% of with targeted think return constant maintaining preserving to to while all as currency a of in also form a financial prepared dividend remarks this net while to ratio We at the a the drive sustainable shareholders the the relates revenue level investment payout in accelerated GAAP growth is to liquidity income. increase return that provide performance. it can provide we of profile. the We very to That capital that a

publicly guidance consideration XXXX have agreements we various in in Embecta months last forward for half revenue unlike incur you fiscal half which Embecta's BD, second assumptions, with Embecta attempts into at to first company. traded of Beginning year I'd result gross XXXX, like financial the contract that place to outline certain Next, XXXX. that This the various as key margin. will little moving with the includes for costs our an very of of take for independent will third-party guidance six manufacturing

inputs in BD, certain While are used are as Embecta offerings. supply which agreements that obtain that for such from cannulas needs product other Embecta's to

to assumes lease worth manufacturing receivable well financial and of will of these to level. expense These months' that with services of assumes factor continuing services very half we'll last exceed Holdridge, incur that period supply addition defined not that a can TSAs earlier transition half XXXX for of a BD Nebraska certain determined BD, also by notice guidance our contract accounts we two financial expense incremental period. from our expenses our six and as impacts, the can additional In detailed Furthermore, item expenses will because to line guidance XXXX second transition years, of as result also were for behalf. Embecta's agreement related facility terminated second of variety at as on BD incur a be Embecta The a things out costed Embecta. to perform and a of

having attempted war of well treasury, we into second other estimates second such such consideration from we functions As include impacts Ukraine, public also on with expenses chain, and XXXX financial of of as exchange we the infrastructure, based and we markets, company. associated some that legal inflation own geopolitical having the also costs part disruptions. costs prepared guidance, incurring stemming tax, of supply our is impact audit and as notably, fees, listing with projections, and finance, quality. that chain HR, These compensation, to external associated IT, the stock up COVID-XX associated take half expenses and as China as our stand most included and corporate half anticipate our various the negative creation Moreover, in regulatory as XXXX we fees, concerns, with supply financial as stock

to have but is inherently these the we future to We due attempted give of elements, realize that trajectory consideration factors unpredictable. these

rates including approximately second X.X. wanted April, and XXXX we a yen of dollar/Japanese Chinese euro/dollar, the end our dollar assumptions given approximately moment and of rate yuan. of to that approximately rate rate Embecta's a of compared a that We half estimates $X.XX, of to pairs to yuan of Those to the CNY derived I These what half half rates spot currency the affect Japanese some ¥XXX, at euro existed financial approximately and second of CNY a Lastly, on of the of key dollar/Chinese business ¥XXX assumed XXXX being dollar highlight our that yen, business. X.X, internationally, is $X.XX, for and take approximately dollar to respectively. based

basis to original diabetes of of ago. foreign removed it fiscal as as-reported few of XXXX remainco items. an down one million X.X%. currency approximately I'd like expected fiscal amount you outlined is of BD guidance revenue recently half represent constant we drivers some XXXX about billion the provide results. to a I've as approximately to half of and approximately XX would XXXX decline, with some for $XXX week take expect we revenue the assumption negative what second approximately six revenue anticipated $XXX to X% drive the the approximately second the revenue a XXXX guidance first provided change revenue in approximately main to This months through to currency the our generate revenue, as some that assumptions, to largely of perspective Beginning that Now year are, in in headwinds XXXX care, for of what financial of as last is guidance $X.X constant year revenue with half months on see our the The well of XXXX. had now is as expect The consistent its when to decline of are dollar due second XXXX key that decrease of million currency the for be or -year half in of it half key compared while included the

that increase we be and two the a during in XXXX, in forms saw our headwind, were this First, half and of as of an rebound COVID a purchased. the COVID-XX second comes products continues to volume from

now countries. we're the some of with impacting in dynamics comparable difficult a for XXXX, and us half COVID XXXX. China create second second faced of These other revenue half the during While disruption

been throughout However, and continuity to our period. this operations able we maintain to date, have of supply

to not XXXX material half participate Next, half are second for business half earlier the an resulting forward. have I well. first revenue expected XXXX. not the and we headwind of Embecta is second be as third, war and latter moving the the amount certain referenced of decisions our will in certain business a Russia XXXX, impact results a and in geopolitical part second second also on XXXX that while in modest do of This in headwind to And in Ukraine, Like a have of to this half we compare of of the the the year half as made results. the XXXX temporary of we the certainties adverse

Lastly, spin, reversals of revenue occurred the of is recognize of to half headwind liabilities. rebate us to that established reserves, we for not us XXXX XXXX we the reverse been half the additional for would analyze as to which prepare reoccur and which in half caused a rebate second our second XXXX, XXXX. during This expected previously some XXXX. second in us the in These in caused have

year related one being manufacturing this is BD. almost worth of the one $XX will we second by expect revenue half to that approximately we million offset generate to of to product sell for during However, contract

gross adjusted to Turning margin.

the that in during be that One achieved half due somewhere up XXXX, This XX% decrease level first represents the we to Embecta. we increased of the expect During adjusted and XXXX, margin will a low second XXs. it's being relating expenses the to factors. few incur standing of to from gross half a we our

both that supply incur incremental at of product to and digit back And gross in year. combined are purchasing as perspective and supply costs as margin. certain material BD markup, impact selling the from single contract manufacturing with being well upper cannula the BD, during the being a Second third chain of of agreements the inflation, half place at we from raw to from second only BD expect

TSA to Moving next expense.

stated I years. the to for As last two TSAs earlier, up

XXXX. Assuming every every that during of we maintain million $XX charged or half total period, TSA we during $XX we maintain be of first to will approximately us. the second TSA, the assumes available that million XX-month currently is a Again,

Finally, primary we an second first Embecta of margin margin, few we half the decline positioned in in embark to is costs incremental that incremental earlier, to additional margin, to second of of XXXX half and Like XXXX as include adjusted investments the which in expect gross investments, company. completes due well EBITDA gross the a R&D. the adjusted low drivers. XXXX, adjusted in with XXs. These EBITDA EBITDA margins very these change robust during the takes discussed That to me from remarks. half is be independent standup my margin Despite as the prepared

Let call me now turn Dev. the back over to Dev?

Devdatt Kurdikar

strong of Thank we think why you, Jake. we Slide the some a see XX, have business. please. On slide will XX, reasons you

we strong into a financial which First, a profile. core, compelling have we showed earlier, as translates

core broadly our defensible. is Second,

intellectual have property, comprised and We patents, trade solid X,XXX knowhow of secrets. approximately

the carefully a and needles in Our decades products. of it's that over manufacturing are long-term gained have knowhow to cannulas. protected. continue BD agreement used experience, with has our to are These we been provide And

an This around we providing XX of and mission solutions Finally, to capability developing to build purpose able people organizational talent Embecta. are workforce single-minded with please. for to the and motivates attract continues diabetes. Slide our

today and our provide core. Let our strong the you how foundation a me business balance sheet through for provides business growth. model healthy financial our now walk Both

from revenue United the with almost we stable, of base recurring, a diverse States. revenue coming our First, half geographically outside have

chronic diabetes majority use products the Our of vast with will are people injection devices. and continue use to

brand distribution efficient and manufacturing supported is is reliable recognition, healthy. profile of and scale long by margin our Second, our history supply, This infrastructure.

our our us allow Fifth, of Fourth, generating to leverage Third, will we have opportunities and on strong any modest we quickly agreement. have covenants cash our starting below in identify. balance leverage credit a suitable are operations. considerably positive the capitalize net we from flow history growth cash that

make you strategic slide us invest financial the you these long-term elements will that flexibility accelerate growth XX, for growth. investments intend our together, to profile. Taken see see to that can On allow we to

do of next to commercial through expect M&A. We and products, the gen introduction investments, this

core stakeholders continue well the with penetrate and investments, ecommerce can other we to every on expand First, as our through includes injection. benefits for diabetes as and a educating business. device new using people This of

investment And remain Type that increase our we R&D. Second, intend our patch has about the we pump market. been X developed to for excited in

where Finally, use commercial add and seek we our strength manufacturing to value. we capabilities will acquisitions and partnerships can

global to Before I my line To and strong have spin. Embecta the done the extend independent even is as Embecta summarize, Q&A, up for to an do we stand continue like diabetes a to to Embecta with after open company. serve people position up thanks team the in we would everything they as for

unique a We open are questions. diabetes-focused your have excited Embecta. create interest With for opportunity we'll about up in now company operator, the the that, in preeminent Thank for you to world. the we line

Operator

And question come our Instructions]. first from Thibault Marie will with [Operator BTIG.

Marie Thibault

quarter the and as Jake, you a financial on public on Dev first the wanted extensive your guidance. here I for start congrats – company. here thank to detail

on questions two Just that. quick

expect of the pressure Embecta I certainly whether future basis. guidance whether expensive in less year-over-year gave part inflationary to that With But some process years. the this year's side. perhaps to input secondly, another choice to if review? their the an is something certainly brand. of discontinue a pressures, some through impact changes the business, Curious Or if that's go a there's you choose for should and understand that brand on we on or you the And a wondering of that cost decision also consumer details inflationary on rolling that is annually?

Devdatt Kurdikar

just the this here. me evaluating process is do, to step respect business back that of we Mary, of let choice Dev. the With

ability We would do transact we we every change and that thousands can the dynamics though That's that geography for to, often would scope over to would the not have expect almost certainly that that distributors, a certainly to on attention of I go serving pay but pay business the close respect we hospitals annually. play customers, the retail, year we in. be depends obviously process and price as I of tender – to made And where renewal to can something a are with expect The of sort is is, And geographic I certainly, the choice retail global to customers attention say the business the pharmacies, everything through the have to hundreds year-over-year. we We you have our are it process through up imagine, from contracts price months not differ customers and tend the vendors. given way that our year-over-year. our of XX pharmacies, particular place see, certainly level side. certainly tender business patients, just customers it's to that those business of see go renew our we the revenue, is do those pressure, ago, on customers with again, we that the we we of diversity take We different. contracts, as transact. adjust done inflationary With so. we to have comes

that of you that incurring you these some we a part the diabetes if managing to feeling are customer pass a have total I point small that, would like are of products of, spend the on to spend to do is opportunity tends the will, inflationary So pressures of cost on obviously person cost base. also if treating disease. with on very the out sort be the to our we diabetes,

a allows as flexibility that us certain so, well. And

Jake Elguicze

spin, things would just still of team again, and board moving term I new year, we from certainly as forward make add same embarked not on came think though in spin sure company. to standpoint, wanted a that that health jump in the if our for a just we necessarily – of also past real being working of we the management Maybe on quick the business longer impact. were Dev we the what prepared the really have to the that types just Obviously, can as good own and position the sort said, for do as to these was

certainly result it March we few constant taken grow which of a business flattish XXXX an to of CAGR. XXXX. we as had there better term even feel to have things are in though just that through were a of term we as and So, relates talked temporary targets, types had longer ago forward our want in And investor out certainly taken they'll health revenue do financial of a put have from would in that as which we for a months we may early called Embecta which impacts standpoint these thoughts when was longer sustainably some currency sort guidance that when no And financial or with, we consideration event, our these business more into we about moving about nearer to decisions, into consideration. customers much position thought

still we few out very we comfortable feel those that with numbers months near-term very, So, ago. put a

Marie Thibault

thoughts. consider A and question you you And curious milestones? profile M&A to XXXX Or for year? on the give start helpful. patch can you would secondly, that's pre hear Is might all it it Is progress where Do this we color growing? loop Is be something it about you think all large? in pump. there to? M&A small? the that more hear fast it that some insulin revenue? of of more look that Any very about sort on to a here we'll closed what's as the hear event Is more Is something is R&D delivery? We're then would it on ideal future,

Devdatt Kurdikar

to the been continue remarks, respect can that stay patch take to talking with when to designation breakthrough it's this I'll to see, I Certainly, FDA. ready something you and away XXX(k) certainly, my the expand milestones on into try certainly mentioned that discussion a respect insulin hardware, itself, going the we questions. as file both expect With device to that's them progressing the have are in the it. afterwards. timing, be our of to respect It's With Jake FDA, on we'll pump, about. I'm to nicely. should With pump developed we the to the from

near revenue leave fiscal the certainly hadn't I'll me start second With any Jake we it on end With achieve you included the gave from of respect XXXX, for just guidance. would on respect hear about as to certain I your more say question, term to pump I that let though, our milestones, to guidance near you'll we through term as heard, think when from the in pump Marie. that that I'll us milestones. then And ask maybe jump off in. in we and now, XXXX

Jake Elguicze

second the could just of you Marie, the question, part please? repeat

Marie Thibault

essentially on a or large, insulin Is profile details? early stage delivery, it Would was totally Any understand It of stage? be commercial M&A to what you they target? potential focused pre-revenue, small? see trying in

Jake Elguicze

M&A this where real our of so an revenue. I standpoint, I think $X.X From a at has is truly or advantages. in company We're think size billion

about a But use unique to that think, the I scale, relevant and sort be internationally. And US both three, as the growth opportunity in types types we the have to of the I M&A transactions accelerator patients. of only really I us. of interested our different revenue, have think to say, would billion think real categories. would be in for I fall in or so in to We that's And at customers and we $X also

may tend own in tied be First, product to those augment smaller in pre-revenue, milestones certain we contingent that efforts. development and nature to and technology it. use R&D to payments and type our internal order have deals would try And

maybe on achievement up revenue or of front regulatory approvals. certain and then cash minimal based So, a milestones series

also in markets. we're international continuing interested to think be more I in certain Second, direct and more

go in some distributors. countries, still direct today, largely we're through but So, we

I in it more financial distributor revenue and look that we show than looking of right? to companies types might scale of pricing, improvements would the margin that and that a pricing, and going at. up other direct things So, recoup be would be as that certain for to kind last, transaction would to become different would improvements Embecta the is then make maybe transactions, in us. And in And say scale sense and some extent markets for potentially that far, far

that more are wouldn't targets needle I move look competing types because, of very, that on for, say, companies the needle envision for the we material ourselves us move could really some things at a not would a So, way very types a necessarily larger more material think candidly, that with the fashion the in could things for different large of we company.

of three the buckets think large I M&A those types of we're So, that different interested are in. sort of

Devdatt Kurdikar

infrastructure? strengths leverage the pharmacy our existing focused be distribution have, products to we other manufacturing the have retailers strengths? history our leverage leverage we will does it preclude honestly, can Can focused, question, think going to but where leverage respect product working therapeutic Is diabetes Is a our to to With market Marie, it that wouldn't about on be can sell it, where would that it with the remain right? strengths we retail I diabetes, and we capabilities capabilities? Right? that we we are provide way leverage can long to of So, products we it we certainly about area to channels our and sold Can emerging well. as our patients?

Operator

comes from question Morgan Cecilia next Our with Furlong Stanley.

Cecilia Furlong

half back turn to wanted for to year. guidance of your I the back the

If your international half all how and just then into back [indiscernible] what's you provide XQ anything of account your Russia-Ukraine, to standpoint versus China, rolls step to from looking in could on also provide lockdowns you can US contributions, guidance also – contemplating, going just a specifically decision that XH taking bit would more from businesses, and how into XQ both what you're color, and you're certain your be then helpful.. away

Jake Elguicze

around second which they're their recently original diabetes guidance from taken we their billion with what what the of is revenue, providing revenue, out again, the would remainco And in and to expect full-year for half numbers had aligned was BD in when for to For guidance. care somewhere year, about $XXX generate that largely million. equate would $X.X

$X in us trying Ukraine. to the to revenue second had more being and obviously, are do some year mentioned a second revenue really that some of we disruptions have I in whereas to half Russia navigate in buckets maybe year-over-year some the now last in tune million half them, of there decline in going disruptions and of year. markets. on annual We impact purchasing, in a those smaller currency the COVID so certainly, temporary three but to that are it's benefits fact headwind the or So, probably the the remarks. we're in and there because X.X%, prepared year some of that's Ukraine, the constant in of through to Russia terms somewhere of the like the of again, going

Again, in of So, contemplating really right the impact sort going second revenue grow away year, in now, those more for the back factoring Embecta's year, that certainly we're of to that to half of half much, really there. the have We're in refer that not walk comes sort somewhere certain indicative if is tune in that future. ability it's like second second of the might headwind. the not to year decisions a then, to of that, of it's to exit business. us, we be in mind, is and down in the something really half larger the temporary the X-million-dollarish nature, and that the of And in any, our

temporary somewhat another something half when impact XXXX. we to But have the and it's going and those to really last it's it year, year with. and made of to in the the it's half of temporary compared did we improvement compared of the comfortable as had second we health feel a the decisions year term, in going the So, step for in back it very XXXX, have we business long while impact – somewhat to of the first

Cecilia Furlong

R&D, but if about what again, forward, just talk half of bit but behind as pump both going pipeline, for could XXXX. of a investment also just expectations an up this well patch more year, back also the this from follow you on I year, R&D your And also, the really, could both, as if you're rest the into your contemplating standpoint,

Jake Elguicze

half then Embecta. including that to up costs and and raw back to the forward. year, continue very is items, need make within to a But as well margin we is the driving in decision in of try and EBITDA R&D, that are very the of mention as drive movement increased And quickly the we EBITDA that obviously half to a we agreements. maybe with obviously to an year the the different I move all well of not standpoint, – so low other Embecta year caution half continues the really to EBITDA spend sort we R&D other first are stand sequential the up one material part getting are expect the would next I in coming patch an rate the to different items in we the our year, is incur think second of the And has of would will I'll of but R&D year, margin, second first of – market just currency do it the half of hopefully, half to the contract over margin. be going the the one that from that over people up obviously as say tick talked investments EBITDA There of deliberate about be its And be very investment making just commercial the the causing going committed new from constant years, half as inflation, the not to that year increased impact notably, XXs year, there initiatives order pump. areas first to costs into will step to it's half adjusted ratably company, from In stand to sure growth of From year of R&D expense well accelerated going probably, on the revenue will to as be the of the of we the half including that accelerate the that the few that just manufacturing half future. of the second own in the from about most margin the few product that the Embecta and does all sort insulin of introductions community trends indicative the year the to first to of second would first second XX% half of as invest understands. investment year the costs Embecta levels. the

Operator

Securities. comes SVB Danielle question Antalffy next Our from

Danielle Antalffy

your on sort that's accelerate you're just where and question. of how and changing? a emerging and to that market against question a to decade sort device markets, evolving I a markets are of could on positioned And rapidly ago, is your emerging I that? more leverage US years of thinking, given of the love Kind innovation a ago, how potentially perspective was would have hear device from emerging how XX – level high views how

Devdatt Kurdikar

mentioned have well asked emerging I China we that And differences maybe focused what I the markets, plants, China, before, we right? ago, markets, us, sort a a we that's States as in newer in is in one of products it XXX right, context fact as key the you so, about So, markets of other think Right? as commercially plant markets. United of source we there are a forward, some but about our for was strength emerging think have for look as decade the in us. one emerging employees of that makes Emerging for of as

as people look of top, that's is we the right? we look with As number the going of in where of growth we in growth forward. occur very emerging start to So, markets, expected forward, patients the at diabetes to if have in number we're the majority

the match really focus insulin. to focus care, think going our care on are injection going well per to because, there. I to those that access to are market better GDP sort getting company better you will they access we and they to And improve, are needs think where capita those strengths and what are of get on increases of economies with And as the as are folks Secondly, the devices. of insulin, as access folks that's see I positioned

newer of but the Now, decades the a that is adopt market be I advanced indeed drugs, there technology, more away. will that will section think

are to region. match strengths really I our with think the just needs positioned the we perfectly of

to our as isn't markets. that M&A and serve the to opportunities product keep same bag our of for the product well, – will about looking entire to looking by we strategy a and As to serve need going Part we our for, the think M&A that's finding way, emerging we global keep we really add market. for,

holistically. So, patients our to needs of sense emerging those to product we really we so more tend in the markets to portfolio meet over continue use widen over there, our can

Operator

question Our comes Blackman next from with Stifel. Mathew

Mathew Blackman

for one parts. with just And me two

First make said. is, just what I sure to you want heard, Jake,

sort You touched this. of on

versus you like, the sequential in XX% second investments up I said, first half think half were standup costs. step of

I did correctly? that hear first, So,

Jake Elguicze

Matt. Yeah,

did. You

being going that is as and moving incur from we be of second of going think to digit not $XX would incremental the the bucket drivers, we three at to of margin which would that So, Embecta. related I to the material from, year. worth going And We the some place and up that's there the and going standing and the of of costs really sort that back raw of the of upper at I first to And is standpoint, something kind obviously, kind the all low included to second product would forward, in to necessarily low of about to the first at in in necessarily first sort kind is product to incur million expect year we related, them is manufacturing there's come where bucket upper of chain of BD XXs. different business half half of we about increased in single a And expenses then, XX%. from expenses the really side, second, the of of half gross none it year, again, year, half spin expect would And are related. would we're the in in I of flip which that that would impact year then, a an expect margin inflation, put two markup, And of from sell have the say in them. the the to contract of to in that half single on really say that's source other the second Embecta related need margin. reflective main of the But to the that the of that gross just the then, supply gross year. is product half agreements that very would margin, we really the digit we're to increase selling

going are caution margin impact going traded company, So, to R&D sort first is to adjusted is, that And the gross be other to consideration impact. half things the you the of And of of in that think terms obviously, margin. year an going as There incur. half there's of isn't we're impact margin, going But to to first of different the half impacting incremental costs again, that the Embecta the publicly the some well. then, EBITDA to to margin would OpEx. have year, whereas of the all standup of additional are we terms half then, investment that the flow standalone into in that obviously we're going have take necessarily year to are of gross certainly adjusted year second obviously through trying costs which, an second as EBITDA I reflective the a

being try forward. in our get M&A going also of that And terms really said a make the think continue of to in line that forward extent also, us flexibility it's EBITDA and is year, EBITDA need becomes sustainable very of to top Embecta that XXs adjusted the low all Now, in be in and back invest do the margin use margin, allows sheet to to adjusted and then that to we allow the to very, the sort organically, margins growth still that being, to the moving adjusted more really investments able available. moving we balance us all EBITDA terms half low of to expecting XXs robust necessary to in

Mathew Blackman

say, the up, between about you're those to four I payouts that – half incremental to there guess largely second but of a the and near-term of XX XX sense, maybe investments? payoffs line way tease I'm the versus, Is making you may would or play any is to sort is, in there if even on years. of those making incremental investments half, the balanced the term projects any timeframes us of to R&D, versus returns balance or expect investments, that or other sort those that balance think portion say, the first let's top these roughest have in follow-up longer that I of sense increase give months, out next way there visibly, three to of sort like out

Devdatt Kurdikar

R&D as provided I think increased through would of sort is guidance spend about our before, insulin our really patch around from you've And we've that of XXXX. certainly, wouldn't the say, through we most to encourage near-term revenue pump. commented anybody

guidance needed we end the an to So, intense pump, area our make haven't of to committed make to sort and achieve success. for But us. life included certainly of We're near-term that investing focus XXXX. project the come commercial in it's of as through to patch revenue from

Operator

you for for your today's all time the Thank is That we you. call. have Thank participation.

Embecta (EMBC) 13 May 222022 Q2 Earnings call transcript