Embecta (EMBC) Q2 2026 earnings summary

Executive summary

• Q2 FY26 revenue declined 14.4% year-over-year to $221.8 million, mainly due to significant U.S. weakness and competitive share loss, while international results met expectations.

• U.S. revenue fell 29.4% year-over-year, driven by pen needle share loss at a major customer and overall market softness; international revenue performed in line with expectations, with stability in China and growth in Latin America, Asia, and Canada.

• The company entered a definitive agreement to acquire Owen Mumford Holdings Limited for up to £150 million, expected to close in May/Q3 2026, contributing ~$30 million to FY26 revenue and accelerating diversification.

• Initiated a review of cost structure and organizational footprint in response to underperformance.

• Announced a $100 million share repurchase program over three years and reduced the quarterly dividend to $0.01 per share to enhance capital flexibility.

Financial highlights

• Q2 2026 revenue: $221.8 million (down 14.4% as reported, 17.4% adjusted constant currency); U.S. revenue: $95 million (down 29.4%); international: $126 million (up 2.1% reported, down 4.1% adjusted constant currency).

• Adjusted gross profit: $131.8 million (59.4% margin, down from 63.7%); GAAP gross profit: $127.8 million (57.6% margin, down from 63.4%).

• Adjusted operating income: $48.6 million (21.9% margin, down from 31.4%); GAAP operating income: $35.0 million (15.8% margin, down from 24.3%).

• Adjusted net income: $16.1 million (EPS: $0.27, down from $0.70); GAAP net loss: $4.1 million (EPS: -$0.07, vs. $0.40 prior year).

• Free cash flow for six months ended March 31, 2026: $47.2 million; $75 million in debt repaid.

Outlook and guidance

• FY 2026 revenue guidance lowered to $1.015–$1.035 billion (from $1.071–$1.093 billion), with organic revenue at $985–$1,005 million; includes ~$30 million from Owen Mumford.

• Adjusted operating margin guidance reduced to 22.25%–23.25% (from 29%–30%).

• Adjusted EPS guidance cut to $1.55–$1.75 (from $2.80–$3.00), with Owen Mumford expected to dilute EPS by ~$0.15 in FY26.

• Adjusted tax rate expected to rise to 28% (from 23%), reducing EPS by $0.10.

• Free cash flow guidance lowered to $95–$105 million (from $180–$200 million), including $40 million in one-time cash use.

• Targeting $150 million in debt repayment for 2026.