Snapshot
Embecta Corp. reported $261M of revenue in Q1 2026, up -0.3% year over year, with diluted EPS of $0.74 and an operating margin of 31.9%.
- Revenue
- $261M
- YoY growth
- +-0.3%
- Diluted EPS
- $0.74
- Operating margin
- 31.9%
$261M
Revenue
+-0.3%
YoY growth
$0.74
Diluted EPS
31.9%
Operating margin
01 Key takeaways
What management said
- •And I am pleased to say that we were able to complete the stand-up phase and all the associated complex initiatives while keeping our constant currency revenue stable.
- •With that work behind us, we are now firmly in the seed growth phase, and this is where the company's focus is now.
- •This phase's goals focus on staying competitive in the core, selectively expanding the portfolio in areas that leverage our existing strengths, and building financial flexibility through disciplined capital allocation.
- •Another key area of focus in the seed growth phase is portfolio expansion through market-appropriate pen needles and syringes.
- •We are leveraging what we already do well to address segments and geographies where there is meaningful demand, but where our share today remains relatively low.
- •Several partners have signed agreements and placed purchase orders, and our pen needles are included in multiple partner-managed regulatory submissions.
- •Importantly, we expect to support this incremental volume within our existing manufacturing footprint and without significant incremental capital investment.
- •Following the significant deleveraging achieved through fiscal year 2025, we continue to focus on free cash flow generation and disciplined capital allocation to create strategic optionality as we progress through the seed growth phase.
- •In summary, while fiscal year 2025 marked the completion of our stand-up phase, Embecta today is focused on execution, portfolio expansion, and positioning the company for durable long-term growth.
- •With that context, let me now review our revenue performance for the first quarter.
- •During the first quarter of fiscal year 2026, Embecta generated approximately $261 million in revenue, reflecting a 0.3% decline year-over-year on an as-reported basis, or a 2% decline on an adjusted constant currency basis.
- •Within the U.S., revenue for the quarter totaled approximately $131 million, reflecting a year-over-year decline of 7.6% on an adjusted constant currency basis.
What went well
- •International revenue of approximately $130 million grew 8.4% reported and 4.6% adjusted constant currency, driven by strength across EMEA and Latin America that exceeded internal expectations.
- •Adjusted EPS increased to $0.71 from $0.65 in the prior year period; adjusted net income rose to $42.3 million from $38.3 million.
- •GAAP net income and EPS were $44.1 million and $0.74, versus zero in the prior year period.
- •Effective January 2026, contracted with an additional Medicare Part D payer for exclusive access and renewed advantaged formulary access with the top three existing Medicare Part D payers.
- •More than 95% of U.S. and Canadian revenue has transitioned to the Embecta brand, with international transitions underway and most regions expected substantially complete by end of calendar year 2026.
- •GLP-1 strategy advanced: collaborating with more than 30 pharmaceutical partners, with more than one-third having selected Embecta and either executed contracts or in negotiations; several signed and placed purchase orders.
- •Syringe revenue grew approximately 5.3% and safety product revenue grew approximately 7.3% on an adjusted constant currency basis.
- •Repaid approximately $38 million of debt, reducing last 12 months net leverage to approximately 2.8x against a covenant of below 4.75x.
- •Completed the stand-up phase (own ERP, distribution, shared services; exit of all TSAs and LSAs) while keeping constant currency revenue stable.
- •Production equipment installed and manufacturing validation underway for market-appropriate pen needles and syringes.
What went wrong
- •Consolidated revenue declined 0.3% as-reported and 2% on an adjusted constant currency basis year-over-year.
- •U.S. revenue of approximately $131 million declined 7.6% on an adjusted constant currency basis, driven by lower pricing and lower volumes reflecting channel dynamics, partially offset by order timing.
- •Pen needle revenue declined approximately 4.4% on an adjusted constant currency basis, driven by the same factors impacting U.S. and China results.
- •Contract manufacturing revenue declined approximately 16.7%, as expected, due to continued insourcing by Becton Dickinson.
- •China remained a headwind in the quarter, though results were in line with expectations.
- •Incremental U.S. pricing headwinds now expected, driving management to guide toward the lower end of full-year ranges.
- •Adjusted gross margin slightly declined to 62.6% from 62.7% year-over-year, driven by unfavorable pricing dynamics and mix.
- •Adjusted operating income decreased slightly to $79.3 million from $80.5 million, partly due to increased R&D expenses.
- •U.S. syringe revenues continued to be impacted by long-term shifts in diabetes treatment toward insulin pens.
Guidance changes
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Performance breakdown
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Earnings call themes & trends
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