Executive Summary

Q3 FY25 delivered an upside print: revenue $295.5M (+8.4% YoY) and adjusted EPS $1.12, with strength driven by U.S. pricing/rebate reserve adjustments and order timing; management raised and tightened FY25 margin/EPS guidance while narrowing revenue ranges .
Adjusted operating margin expanded to 36.9% (+630 bps YoY) and adjusted EBITDA margin to 44.3% (+790 bps YoY); GAAP diluted EPS was $0.78 .
Balance sheet improved: cash + restricted cash $233.6M, no revolver draw; principal debt outstanding $1.489B; Q3 debt paydown $52.4M, YTD $112M; management now expects ~$150M FY25 debt reduction and cited LTM net leverage ~3.2x .
FY25 outlook: revenue range narrowed to $1.078–$1.085B; margins and adjusted EPS raised to $2.90–$2.95 on minimal tariff headwinds and cost controls; Q4 revenue implied ~mid-$260Ms given reversal of Q3 timing/pricing items and softer China .
S&P Global consensus context: EMBC delivered a beat on revenue ($295.5M vs $278.2M*) and adjusted EPS ($1.12 vs $0.78*); EBITDA also above S&P’s EBITDA consensus (definitions differ) (see “Estimates Context”). Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well
- U.S. commercial execution: U.S. revenue +11.6% YoY with contribution from pricing (rebate reserve adjustments) and favorable order timing ahead of July 4 and brand-transition stocking .
- Margin strength and profitability: adjusted operating margin 36.9% (30.6% LY) and adjusted EBITDA $131.0M (44.3% margin), up from $99.2M (36.4%) LY .
- Strategic milestones: ERP cutover and India distribution fully implemented; >90% of North America revenue transitioned to embecta-branded products, concluding a multi‑year separation program; multiple contracts/P.O.s to co‑package pen needles with potential generic GLP‑1s .
What Went Wrong
- Gross margin down YoY: adjusted gross margin 67.2% vs 69.8% LY due to lower profit-in-inventory benefits vs prior year ERP-related inventory effects .
- China softness and geopolitical headwinds: guidance embeds lower China Q4 revenue on local-brand preference and distributor inventory rebalancing; FX −$3M expected Q3→Q4 .
- R&D step-up ahead: management anticipates incremental Q4 R&D for low-cost pen needle/syringe lines, cannula independence, and GLP‑1 partnerships, contributing to sequential margin step-down into Q4 .

Financial Results

Headline metrics (company-reported). Periods ordered oldest→newest.

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($M)	$261.9	$259.0	$295.5
GAAP Diluted EPS ($)	$0.00	$0.40	$0.78
Adjusted EPS ($)	$0.65	$0.70	$1.12
Gross Margin (%)	60.0%	63.4%	66.7%
Adjusted Gross Margin (%)	62.7%	63.7%	67.2%
Operating Margin (%)	11.0%	24.3%	31.8%
Adjusted Operating Margin (%)	30.7%	31.4%	36.9%
Adjusted EBITDA ($M)	$97.3	$97.1	$131.0
Adjusted EBITDA Margin (%)	37.2%	37.5%	44.3%

YoY lens (Q3 2025 vs Q3 2024):

Revenue $295.5M vs $272.5M (+8.4%) .
Gross margin 66.7% vs 69.8% (−310 bps) .
Adjusted operating margin 36.9% vs 30.6% (+630 bps) .
Adjusted EPS $1.12 vs $0.74 .

Segment breakdown – Q3 2025

By geography:

Region	Revenue Q3 2025 ($M)	Revenue Q3 2024 ($M)	Reported Growth	Adj. Constant Currency Growth
United States	$160.2	$143.6	11.6%	11.6%
International	$135.3	$128.9	5.0%	4.2%
Total	$295.5	$272.5	8.4%	8.0%

By product family:

Product	Revenue Q3 2025 ($M)	Revenue Q3 2024 ($M)	Reported Growth	Adj. Constant Currency Growth
Pen Needles	$216.9	$201.3	7.7%	6.8%
Syringes	$35.1	$31.7	10.7%	14.5%
Safety	$34.8	$32.4	7.4%	6.5%
Other	$3.2	$3.5	(8.6%)	(5.7%)
Contract Mfg.	$5.5	$3.6	52.8%	47.2%
Total	$295.5	$272.5	8.4%	8.0%

KPIs and balance sheet

KPI	Q2 2025	Q3 2025
Free cash flow ($M)	—	~$81 (incl. ~$26 factoring)
Free cash flow ex-factoring ($M)	—	~$55
Cash & equivalents + restricted cash ($M)	$212.3	$233.6
Debt principal outstanding ($B)	$1.542	$1.489
LTM net leverage (x)	—	~3.2x
Dividend per share ($)	$0.15	$0.15
Debt paydown in quarter ($M)	$27.4	$52.4
YTD debt reduction ($M)	—	~$112

Guidance Changes

FY2025 guidance: previous (May 9, 2025) vs current (Aug 8, 2025).

Metric	Period	Previous Guidance (May 9)	Current Guidance (Aug 8)	Change
Reported Revenues ($B)	FY 2025	$1.073–$1.090	$1.078–$1.085	Narrowed; midpoint unchanged
Reported Revenue Growth (%)	FY 2025	(4.4)%–(2.9)%	(4 sop) (4.0)%–(3.4)%	Narrowed; slightly tighter range
FX Impact (%)	FY 2025	(0.8%)	(0.8%)	Maintained
Italian Payback Impact (%)	FY 2025	+0.4%	+0.4%	Maintained
Adjusted Constant Currency Revenue Growth (%)	FY 2025	(4.0)%–(2.5)%	(3.6)%–(3.0)%	Narrowed; midpoint consistent (per CFO)
Adjusted Gross Margin (%)	FY 2025	62.75%–63.75%	63.25%–63.50%	Raised/narrowed
Adjusted Operating Margin (%)	FY 2025	29.75%–30.75%	30.75%–31.00%	Raised
Adjusted EPS ($)	FY 2025	$2.70–$2.90	$2.90–$2.95	Raised
Adjusted EBITDA Margin (%)	FY 2025	36.25%–37.25%	37.25%–37.50%	Raised

Management also now expects ~$150M FY25 debt reduction vs having already achieved $112M YTD by Q3 .

Earnings Call Themes & Trends

Topic	Previous Mentions – Q1 2025	Previous Mentions – Q2 2025	Current Period – Q3 2025	Trend
ERP & separation	Brand transition planned H2’25; restructuring after pump discontinuation	Brand transition on track; raised profitability despite lower revenue guide; restructuring to streamline	ERP fully implemented including India; conclusion of multi‑year separation; >90% NA revenue rebranded	Execution largely complete; risk reduction
GLP‑1 initiatives	Progress on co‑packaging and retail packs	Received several POs for co‑packaging; expanded GLP‑1 retail packaging	Multiple contracts and POs signed; working with 30+ pharmas; commercialization as early as 2026 in some markets	Building momentum; medium‑term catalyst
Tariffs/macro	FX headwinds in guide; separation spend continuing	Incremental tariffs noted but maintaining as‑reported revenue via FX; cost controls	Minimal FY25 tariff impact; US‑China rates ~10% near-term; exemptions help diabetes devices	Tariff risk eased for FY25
China	—	—	Anticipating softer Q4 due to local brand preference, distributor inventory rebalancing	Heightened geopolitical/demand risk
Cash flow & deleveraging	Debt paydown $32.4M in Q1	Accelerated free cash flow; additional $27.4M paydown	~$81M FCF (incl. factoring); leverage ~3.2x; plan ~$150M FY25 paydown	Improving balance sheet flexibility

Management Commentary

“Q3 was a strong quarter for embecta… we are tightening and raising our fiscal 2025 outlook for key financial metrics.” — CEO Devdatt Kurdikar .
“Third quarter revenue reached all-time highs… due entirely to overperformance within the U.S., driven equally by rebate reserve adjustments and timing of distributor orders… we expect the timing-related benefits to reverse in Q4.” — CEO .
“Adjusted operating income and margin totaled $109.1M and 36.9%… increase primarily due to lower R&D expenses from discontinuing the insulin patch pump and higher revenue/gross profit.” — CFO Jake Elguicze .
“We paid down ~$52.4M in Q3, ~$112M YTD, and now expect to reduce outstanding debt by ~$150M in FY25; LTM net leverage ~3.2x.” — CFO .
“Tariff impact in FY25 expected to be minimal… US‑China rates around 10% currently; diabetes products benefit from exemptions; China demand facing local-brand preference.” — CEO .

Q&A Highlights

Q4 revenue/margins cadence: Q4 implied midpoint ~$265M (vs Q3 $295.5M), driven by reversal of distributor order pull-forward, non-recurrence of ~$7M rebate adjustment, ~$3M incremental FX headwind, and softer China; margins step down on lower revenue, P&I turning to slight expense, and seasonal OpEx .
Free cash flow: ~$81M in Q3 (incl. ~$26M factoring) and ~$55M ex-factoring; underlying FCF power seen as >$200M annualized; supports continued deleveraging and optionality for organic/inorganic investments .
Policy/market dynamics: CMS competitive bidding proposal could be an ancillary tailwind but too early to quantify; GLP‑1 compounder syringe use not a major focus vs larger generic GLP‑1 co‑packaging opportunity .
China outlook: Guidance incorporates lower Q4 distributor orders given geopolitics and inventory rebalancing; long-term mid‑single‑digit volume growth still expected in China .

Estimates Context

S&P Global consensus vs reported (Q3 FY25). Values retrieved from S&P Global.

Metric	Consensus*	Actual (S&P “actual”)*	Surprise
Revenue ($M)	278.2*	295.5*	+6.2%*
Primary EPS ($, adj basis)	0.78*	1.12*	+44%*
EBITDA ($M)	102.7*	113.9*	+10.9%*

Notes:

Company-reported adjusted EBITDA was $131.0M (44.3% margin), reflecting a different definition than S&P’s EBITDA figure .
Estimate counts: EPS (4), Revenue (4); Target price consensus mean ~$16.67 (3 estimates)*. Values retrieved from S&P Global.

Key Takeaways for Investors

Quality beat with operational drivers: strong U.S. execution (pricing adjustments and order timing) and disciplined OpEx lifted adjusted EPS and margins; expect Q4 normalization as temporary benefits reverse .
Guidance skew improving: margins and adjusted EPS raised; revenue narrowed with midpoint intact; negligible tariff headwinds and restructuring savings support profitability .
Balance sheet momentum: robust FCF, accelerated deleveraging (target ~$150M FY25 reduction), and no revolver usage improve flexibility for growth investments .
Medium-term catalysts: GLP‑1 co‑packaging contracts and retail pack expansion can diversify growth from 2026+; progress across >30 pharma partners is tangible .
Watch items: gross margin sensitivity to profit‑and‑inventory effects, China demand/geopolitical pressures, and Q4 step-down in revenue/margins as timing and rebate benefits fade .
Dividend consistency: $0.15/share maintained alongside deleveraging .
Trading setup: near-term volatility possible into Q4 on expected sequential step-down; medium-term thesis supported by margin upgrades, brand transition completion, and GLP‑1 adjacency optionality .

Appendix: Additional Q3 Details

Revenue bridge drivers: +$13.5M volume, +$6.8M price, +$1.7M contract manufacturing to BD, +$1.0M FX .
Q3 cash & liquidity: $233.6M cash/restricted, $1.489B debt principal, $0 drawn on $500M revolver .
Dividend: $0.15/share payable Sep 15, 2025 (record Aug 29) .

Values retrieved from S&P Global where marked with *.

Embecta Corp. (EMBC)·Q3 2025 Earnings Summary