Q2 2025 Embecta Corp Earnings Call
Speaker Change: Please stand by. Welcome, ladies and gentlemen, to Embecta's Corpse Fiscal Second Quarter of 2025 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode.
Speaker Change: Please note that this conference call is being recorded and a replay will be available on the company's website following the call. I'll like to hand the conference call over to your host today, Mr. Pravesh Khandelwal, vice president on vested relation, Mr. Khandelwal, please go ahead.
Thank you, Operator.
Speaker Change: Good morning everyone, and welcome to Embecta's Fiscal Second Quarter 2025 Oning Conference Call.
Speaker Change: With me today are Devkodikar, Embecta's President and Chief Executive Officer, and Jake Elguicze at Chief Financial Officer.
Speaker Change: We wish to caution you that substatements are, in fact, forward looking in nature and are subject to risks and uncertainties and actual events or results may differ materially.
Speaker Change: The factors that could cause actual results or events to differ materially include but are not limited to factors referenced in a press release today as well as our filings with the SEC which can be accessed on a website.
Speaker Change: In addition, we will discuss certain non-GAAP financial measures on this call which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in an oppressed lease and conference call presentation.
Speaker Change: Our agenda for today's call is as follows. Dev will begin by providing some remarks on the overall performance of our business during the fiscal second quarter of 2025, as well as an overview of our strategic priority.
Speaker Change: Jake will then review our financial results for the fiscal 2nd quarter of 2025, as well as discuss the updated financial guidance for fiscal year 2025. Following these updates, we will open the call for questions. With that said, I would now like to turn the call over to our CEO Devkudikar.
Dev Kurdikar: Good morning, and thank you for taking the time to join us. Since we announced the termination of our patch pump program five months ago, we have been advancing the next phase of Embecta's transformation.
Dev Kurdikar: At the heart of this transformation are three strategic priorities that are guiding our execution and shaping our future.
Dev Kurdikar: First, strengthening our core business. We are making solid progress in our global brand transition with implementation in the US and Canada underway and on track for substantial completion in the second half of fiscal year 2025.
Dev Kurdikar: Simultaneously, we are pursuing initiatives within our core portfolio that solidify our customer relationships and reinforce our leadership in insulin injection devices.
Dev Kurdikar: Second, expanding our product portfolio. We are advancing initiatives to bring market-appropriate products to patients by leveraging our strengths in high-volume manufacturing and global commercial
Dev Kurdikar: and expanding availability of our pen needles in appropriately sized retail packaging for use with branded GLP1 drugs delivered via pen injectors. Third, increasing our financial flexibility.
Dev Kurdikar: With the Insulin Passcom Program restructuring plan substantially complete, we remain on track to deliver meaningful cost synergies.
Dev Kurdikar: In fiscal 2025, we remain committed to our goal of paying down approximately 110 million dollars in debt.
Dev Kurdikar: With strong, free cash flow generation and the majority of the overall separation related costs behind us, we believe we are well positioned to strengthen our balance sheet and and enhance our financial agility.
Dev Kurdikar: We believe consistent execution against these priorities will position Embecta for sustainable performance and long-term success.
Dev Kurdikar: As compared to the midpoint of our prior guidance range, approximately half of the overachievement in the quarter was due to constant currency performance, while the other half was due to foreign exchange being less of a headwind than we previously anticipated.
Dev Kurdikar: Turning to some additional highlights, during the second quarter, we published the updated Twitter forward-expert recommendations in Mayo Clinic proceedings. This is an important milestone in our commitment to improving clinical outcomes as the recommendations support the best global practices for insulin injection technique, device optimization, and provider training.
Dev Kurdikar: Additionally, during Q2, Embecta conducted a company-wide employee engagement survey through great place to work, a global authority on workplace culture, employee experience and the leadership behaviors proven to deliver markedly in revenue, employer tension and increase innovation.
Dev Kurdikar: We have a tremendous response rate from our employees worldwide and we are pleased to announce that we have received certification as a great place to work for 2025 in eight countries.
Dev Kurdikar: This recognition is a testament to the effort our teams have put into building a strong authentic and inclusive culture.
Dev Kurdikar: I'm also pleased to announce that we are continuing to advance our efforts to co-package our pennies with potential generic GF-1 drugs, as well as making our pennies available in retail packaging appropriate for use with branded GF-1 drugs delivered by pen injectors.
Dev Kurdikar: We expect this will enable us to expand into a fast growing market while leveraging our world-class distribution and commercial expertise.
Dev Kurdikar: We have received several purchase orders from generic manufacturers to co-pack its app and we look forward to sharing more details about these partnerships and the market potential at our upcoming analyst and investor day.
Dev Kurdikar: We have completed the majority of the steps required to implement the discontinuation of a insulin tax fund program and the associated restructuring plan announced in November 2024. This progress has occurred within our previously expected timeline.
Dev Kurdikar: Additionally, our standard activities are largely complete, with only India yet to be conditioned to our ERP system and distribution network within the next few months.
Dev Kurdikar: Therefore, we continue to be focused on reducing our gas structure, and during the second quarter, we initiated a separate restructuring plan aimed at seamlining our organization.
Dev Kurdikar: We expect the plan to be substantially complete by the end of fiscal year 2025. As a result, we anticipate incurring total pre-stacks charges of between 4 to 5 million, the majority of which are expected to be calculated.
Dev Kurdikar: This action is expected to drive meaningful efficiencies with estimated pre-tax cost savings of between 7 to 8 million dollars during the second half of fiscal 2025.
Turning to the next slide.
Dev Kurdikar: In line with our commitment to enhancing financial flexibility, we continue to reduce our debt, making an aggregate principle payment of approximately $27 million on a term-loan-be facility
Dev Kurdikar: While on a year-to-date basis, we have reduced that by approximately $60 million, which puts us well on track to achieve our goal of reducing that by approximately $110 million during fiscal 2025.
Dev Kurdikar: Finally, as we reflect on our second quarter results and look ahead to the remainder of the year, we are updating our fiscal 2025 guidance.
Dev Kurdikar: While our teams delivered slightly better than expected financial performance during the first six months of the year.
Dev Kurdikar: We are adjusting our full year 2025 Concentrancy Revenue Outlook.
Dev Kurdikar: to account for lower projected US volumes primarily associated with anticipated reductions in customer inventory levels, tighted store closures at a specific US retail pharmacy customer.
Dev Kurdikar: That said, our as reported revenue guidance remains largely intact, supported by favorable foreign exchange
In terms of gross margins, [inaudible]
Dev Kurdikar: We have updated our guidance to reflect the lower constant currency revenue expectations, as well as the estimated impact of currently implemented incremental tariffs, which are expected to be a headwind of approximately 25 basis points to our fully adjusted gross margins.
However
Dev Kurdikar: Even with these admins, we are raising our guidance ranges for adjusted operating and adjusted EBITDA margins for a year due to disciplined expense management and the initiation of the previously mentioned restructuring plan in the second quarter. We are also reaffirming our adjusted earnings per share outlook for fiscal year 2025.
Dev Kurdikar: We are executing the program in phases as intended and preparing to transition most of the remaining markets in the next fiscal year in line with our original plan. We continue to expect the global transition to be completed within the next couple years.
Dev Kurdikar: On the slide, you will see an example of the new embedded branded packaging contrasted with the legacy BDE nano second-gen packaging. Importantly, product names and color cues will remain unchanged, a deliberate decision informed by customer research. At the same time, we are introducing a modern refresh look while maintaining the visual elements that help healthcare providers and people with diabetes easily recognize our products.
Dev Kurdikar: We remain focused on ensuring operational readiness along the supply chain, including inventory management.
Dev Kurdikar: Customer Communication and Regulatory Compliance This thoughtful phase approach is designed to ensure a smooth transition while preserving the trust of those who rely on our products
Dev Kurdikar: First, in advance of a price increase that went into effect on April 1st of 2024, we saw certain customers purchase additional products that positively impacted our second quarter of 2024 results.
Dev Kurdikar: Revenue Total $123.8 million, which equated to a 7% and a $10 million decline on an adjusted constant currency basis as compared to the prior year period.
Dev Kurdikar: Like the US, this decline was expected, and due to certain customers purchasing additional products in advance of ERP implementations in certain regions in the prior year period.
Syringe Revenue, Group by Approximately 1.7% [inaudible]
Dev Kurdikar: Safety products grew approximately 4.2% and contract manufacturing grew approximately 73%. The decline in year-over-year penitle revenue was primarily driven by the timing issues associated with price increases that went into effect within the US coupled with the unfavorable prior comparison stemming from ERP-related inventory buzz within our international markets.
Dev Kurdikar: Turning to a syringe product, they grew in the quarter by 1.7 percent, driven by international markets, specifically Latin America and Asia.
Dev Kurdikar: While our safety products grew 4.2% as compared to the prior year period, due to the annualization of share gains resulting from a competitor discussing the product and exiting the market.
Dev Kurdikar: That completes my prepared remarks and with that, let me turn the call over to Jake to review other Q to financial highlights as well as provide our updated financial guidance for fiscal year 2025. Jake?
Jake: Thank you, Dev, and good morning, everyone. Given the discussion that has already occurred regarding revenue, I'll start my review of impact this second quarter financial performance at the gross profit line.
Jake: This compares to 185.4 million, and 64.6% in the prior year period.
Jake: This compared to 185.8 and 64.7% in the prior year period.
Jake: The year-over-year decline in adjusted gross profit and margin was primarily driven by the impact of that changes in profit in inventory adjustments.
Dev Kurdikar: as well as the lower year-over-year revenue that Devdatt mentioned all of.
These headwinds were partially offset by manufacturing cost improvement programs.
Lower Supply Chain Functional Spend.
Lower Freight Costs [inaudible]
Thank you very much.
Turning to Gap, Operating Income, Donald Trump, Rishi Parekh,
Dev Kurdikar: During the second quarter, they were 62.9 million and 24.3%
Dev Kurdikar: Discompared to 39.2 million and 13.6% in the prior year period.
Dev Kurdikar: Juan and Adjusted Basis are Q2 2025 adjusted operating income and margin, totaled 81.4 million and 31.4 percent.
Discompare to 74.99.
And 26.1% in the prior year period.
Dev Kurdikar: The year-over-year increase in adjusted operating income and margin is primarily due to lower R&D expenses associated with the discontinuation of our insulin patch pump program.
Dev Kurdikar: as well as lower SG&A expenses primarily driven by lower TSA costs.
as well as lower compensation and marketing expenses.
Dev Kurdikar: This was offset by the adjusted gross profit changes. I just out.
Turning to the bottom.
Dev Kurdikar: Gapnet income and earnings per deluded share were 23.5 million and 40 cents during the second quarter of
Dev Kurdikar: as compared to 28.9 of them, and 50 cents in the prior year period.
Dev Kurdikar: While on an adjusted basis during the second quarter of fiscal 2025, that income and earnings for share worth 40.7 million and 70 cents.
as compared to 38.9. Michael Polark, Rishi Parekh, Jacob Elguicze,
and 67 cents in the prior year period.
Dev Kurdikar: The increase in year-over-year adjusted net income and deluded earnings per share is primarily due to the adjusted operating profit drivers I just discussed.
as well as a reduction in interest expense.
Dev Kurdikar: This was partially offset by an increase in our adjusted tax rate from approximately 18% in Q2 of 2024 to approximately 25% in Q2 of 2025.
Dev Kurdikar: Lastly, from a P&L perspective, to the second quarter of 2025, our adjusted Ebeda and Margin total approximately 97.1 million, and 37.5%.
I've compared to 90.8 million.
and 31.6% in the prior year period.
Turning to the balance sheet and cast flow.
Dev Kurdikar: At the end of the second quarter, our cash balance totaled approximately 212,000.
Dev Kurdikar: While our last 12 months, that leverage has defined under our credit facility agreement.
Stuart at approximately 3.7 times.
Dev Kurdikar: As a reminder, our net leverage covenant requires us to stay below 4.75 times.
Dev Kurdikar: As Dev mentioned earlier, we continue to be focused on more aggressively de-laboring.
Dev Kurdikar: and during the second quarter, he paid down 27.4 million of term-long V-datt.
Dev Kurdikar: I'm pleased to say that we remain on track to achieve our goal of reducing our growth by 110 million during fiscal 2025.
Dev Kurdikar: as well as getting our net leverage levels to approach approximately three times by your end.
Dev Kurdikar: That completes my prepare remarks on our second quarter of 2025 results.
Dev Kurdikar: Next, I would like to discuss about this updated 2025 financial guide in certain underlying
Dev Kurdikar: Before I begin, I want to acknowledge the evolving power of landscape.
and provide some important contacts regarding our global operations.
Dev Kurdikar: As a reminder, we manufacture our products across three key facilities.
Son Leary Irwin,
Hold Rich in Nebraska, and Suzhou, China.
Dev Kurdikar: We do not perform any manufacturing in either Canada or Mexico.
Dev Kurdikar: It's important to note that tire-of-regulations extend beyond manufacturing location and require detailed analysis of pre-classifications and rules of origin to determine potential exposure.
As it relates to our global operations,
Dev Kurdikar: We have now incorporated the impact of tariffs currently in effect.
Dev Kurdikar: notably the incremental 125% tariffs for raw material and finished goods being imported into China with the US as the country of origin.
Dev Kurdikar: The incremental 145% tariffs for imports into the U.S. from China.
Dev Kurdikar: and incremental baseline 10% tariffs for imports into the U.S. from certain other countries.
Dev Kurdikar: We have also assumed that certain exemptions are applicable to certain materials and finished goods being imported into the US.
Dev Kurdikar: We have not incorporated the potential incremental tariffs that may be implemented after the current clause on tariffs has expired.
giving it uncertainly surrounding the evolving global trade involved.
Art estimates remain subject to change. [inaudible]
Dev Kurdikar: and we will continue to monitor this situation and provide updates when appropriate.
Dev Kurdikar: As always, we remain committed to mitigating potential impacts where possible.
Dev Kurdikar: To make sure we continue supporting our customers and the people living with diabetes who rely on our products.
Now, let me discuss our updated guidance.
Beginning with Rebbe
Dev Kurdikar: On an adjusted constant currency basis, we are lowering our previously provided guided
from both the low and high ends. [inaudible]
Dev Kurdikar: As we now call for revenue to decline between 2.5% and 4% as compared to 2024.
Dev Kurdikar: At the low end of the road, we estimate that bonding will be a headwind of approximately 3%.
and that pricing will be a headwind of approximately 1%.
Dev Kurdikar: Meanwhile, at the high end of our constant currency revenue guidance range, we estimate that the bottom will be a headwind of approximately one and a half percent.
and that pricing will be a headwind of approximately 1%.
Dev Kurdikar: As Dev noted earlier, the additional 1.5% volume headband, which we have incorporated into our outlook.
Mr. Irvin Weinblower, Projected US Followings [inaudible]
Primarily associated with the anticipated reduction in customer inventory levels.
Dev Kurdikar: tied to store closures at a specific U.S. retail pharmacy customer.
Dev Kurdikar: We believe this is transitory and does not reflect any fundamental change in the stability of our
Turning to our thoughts on FS.
Dev Kurdikar: Since we've provided our updated fiscal 2025 financial guidance in early February ,
Dev Kurdikar: As compared to our prior guidance, which call it for effects to be a headwind of approximately 2.2%.
Dev Kurdikar: Additionally, our AS reported 2025 gap revenue will not be impacted by the 2015-2023 amount that we needed to accrue associated with the Italian payback measure.
which impacted our 2024 as reported gap revenue.
Disciplines to a Tailwind of Approximately 0.4%
Turning to Adjusted Grossmore.
Dev Kurdikar: and now expect adjusted gross margin to be in the range of between 62.75% and 63.75%.
Dev Kurdikar: The reduction in our current versus prior adjusted gross margin guidance is primarily due to the reduction in our
as well as the Incidental Impact of Terrace.
This is somewhat offset by favorable profit and inventory adjustments.
Dev Kurdikar: and cost improvement actions we are taking within cost of sales.
Dev Kurdikar: While from an adjusted operating margin standard, we are raising our guidance from a range of between 29.5% and 30.5%.
Dev Kurdikar: This improvement in adjusted operating margin is primarily driven by the expected cost savings associated with the restructuring plan announced this quarter.
Moving to arms.
are better than expected, second quarter earns performance.
Dev Kurdikar: Coupled with the restructuring plan we announced today, as well as favorable shifts in foreign exchange.
Dev Kurdikar: are enabling us to absorb the impact of the lower adjusted constincurrency revenues and incremental
Dev Kurdikar: thereby allowing us to maintain or previously provided adjusted deleted earnings for share guidance ring.
of between $2.00 and $0.70.
and 2 hours and 90 cents.
Dev Kurdikar: Our updated guidance range continues to assume that our annual net interest expense will be approximately 107 million.
that our annual adjusted tax rate will be approximately 25%.
Dev Kurdikar: and that our weighted average diluted chairs outstanding will be approximately 58.9 million.
Arguidance also continues to assume.
Dev Kurdikar: that we will use between 50 and 60 million of cash during fiscal 2025, associated with separation costs.
largely related to brain transition.
while as it relates to capital expenditures.
Dev Kurdikar: We now expect to incur approximately 15 million during the year, down from our prior estimate of approximately 20 million per cash usage associated with the discontinuation of our insulin pass-pop program.
Dev Kurdikar: as compared to our previous estimates of between 25 and 30 minutes.
Dev Kurdikar: Lastly, for the same reasons we increased our adjusted operating margin at guidance range.
We are also raising our adjusted eva.marsh and goddess range.
from a range of between 36 and 37%.
to a new range of between 36.25% and 37.25%.
Dev Kurdikar: And before I turn the call over to the operator, I wanted to take a moment to remind that we will be hosting our inaugural analyst and investor dad on May 22 in New York City.
Dev Kurdikar: We're looking forward to providing a deeper look into our portfolio, value creation opportunities, and long-term financial objectives.
We hope to see many of you there.
Please RSVP by following the instructions on this slide.
Speaker Change: With that, I would like to now turn the call over to the operator for questions.
Operator
Speaker Change: Thank you. At this time, we'll conduct the question and session. As a reminder, as a question, you'll need to press star 111 on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question, please print start one one again. Please name yourself to one question and a follow up. Please stand by what we compiled a Q&A roster.
Speaker Change: Now first question, because it's a line of Kallum Titchmarsh of Morgan Stanley , the line is now open.
Speaker Change: How we should think about modelling these products for the remainder of the year, kind of most keen to get a bit more color on some of those moving parts in the US. You know, you called out the customer inventory bits and store closures. Are you now comfortable that they are kind of isolated issues and behind you? Thanks a lot.
Speaker Change: Good morning, Kallum, and thanks for the question. So, maybe some context is in order here.
Speaker Change: As you may remember, fiscal 2024, we had a number of rolling ERP implementations throughout the year.
U.S. and Canada went live in...
Speaker Change: And then we are China and Latin America in the Falling Quarters, Latin America, you know, as recent as Q1 2025.
Speaker Change: And our goal, as we did that, was to ensure that we maintained product continuity. As you know, these implementations, in our case, coupled with changes in distribution network and setting up new shared services are pretty complex. And so we were very careful to make sure that the distributors through which our products flow.
Speaker Change: Had enough inventory of these products that they could maintain, continuity of supply, in case there were any hiccups.
Speaker Change: Now, the executions went very well, we did not have a hiccups, but that leads to unfavorable year-over-year comparisons for both our US business and our international business.
That was obviously...
Speaker Change: And then finally, the third effect that just to keep in mind because it does impact...
You know, thirdly, Geographic Year Overyear Comparisons, as well as...
Comparison, Comparison for Product Family.
Speaker Change: You know, Farrah from the business standpoint is a good thing. Last year, which is in fiscal 2024.
Speaker Change: We had a US price increase on the 1st April of 2024 and this year we had it on January 1st, 2025.
Speaker Change: Justice Revenue, Bi Geography, and in total. And you can imagine with pen needles being approximately 76% of our total revenue that impacts the pen revenue business quite significantly. Particularly when you think about the ERP implementations in which regions there occurred because in certain regions.
Speaker Change: They are primarily a penile business. So those are really the factors. Now with syringes, we are again seeing some strength.
Speaker Change: in both Latin America and Asia, and we had the opportunity to optimize our pricing in the U.S., and that has helped our students results as well. The second part of your question was about...
Speaker Change: You know, the adjustments that we've made for store closures. So maybe some background there.
Speaker Change: But I don't want to point out that we sell product to a third party distributor that serves that
a former mentioned pharmacy chain, but also serves other customers. Now, obviously
Speaker Change: We don't have any particular insight into the timing of the plant store closures, but what we did notice was in the late Q2.
Speaker Change: We noticed a change in the ordering pattern by the distributor that we supply product to. Now, we believe it's linked to the planned store closures and so what we've tried to do is estimate and be prudent in the incorporation of that impact into a, into Fulia guidance.
I shall also note.
that in case of store closures, obviously
Speaker Change: You know, the pharmacy chain is going to obviously try to retain those patients within their own network.
Speaker Change: Sometimes these patients might leave and go to other pharmacy chains, but at the end of the day our products are chronic use, medically necessary products.
And so, we do expect that these patients,
Speaker Change: If they are not purchasing it from a store that they used to, but it now closed, we'll go into other retail outlets to purchase this product and given our strength,
Speaker Change: in the U.S., it is quite possible that those patients will continue using our products. There might be a timing lag here because as I mentioned the product flows to the distributors and it takes time for these demand signals to adjust.
Speaker Change: So, look, I mean, long, sort of sum it up, we've tried to be as prudent as we can in estimating this. We recognize it's early in the process of store closures, and certainly we'll update it as we go along here.
Speaker Change: Great, just to follow up there, I think the streets kind of shaking out at, I think, 7-8% quarter of a quarter growth into physical year Q3. Are you happy with that given the, given the guide? Where should we be taking that little guide cut out of our numbers for the year? Thanks a lot.
Speaker Change: Yeah, Kallum. Thanks for the question. This is Jake. Maybe I'll jump in here. I think if you think about our guide for the first half of the year, we always thought.
Speaker Change: for the reasons that Dev outlined that the second half of the year was going to be stronger than the first half of the year. And really nothing has necessarily changed in that thought pattern in terms of second half strength versus the first half because of...
Speaker Change: Just all the the the one off items that sort of impacted the first half of 2024 in terms of the ERP go lives and whatnot.
Speaker Change: So we were down, you know, on a six month basis, I think our constant currency revenues were down, you know, around 6.3 percent.
in the second half of the year.
Speaker Change: Strange. We certainly do expect there to be an improvement and see some momentum as we move throughout the second half of the year.
Appreciate it, guys. Thank you.
Thank you, one moment for our next question.
Speaker Change: Wanted to get a little bit more detail on some of this how much of that impact is coming from sort of the U S. China.
Speaker Change: Tariffs as we get those trade talks hopefully started here this weekend.
Speaker Change: And.
Speaker Change: In terms of Annualizing. Some of this given youre kind of on a different fiscal year, how should we think about this.
Speaker Change: Next fiscal year of course understand there will be litigation.
A lot of fluid.
Speaker Change: Dynamics here.
Speaker Change: Yes, Murray thanks for thanks for the question.
Speaker Change: Yes, so youre correct.
Speaker Change: Or right now just given given our manufacturing.
Speaker Change: Print and the way that our products.
Speaker Change: Hello.
Speaker Change: We are thinking that there is going to be.
Speaker Change: The $3 million or 25 basis point impact to our full year margins $3 million of incremental expense associated with these tariffs in the second half of the year that does relate to exactly what you were referring to.
Speaker Change: The dynamic between.
Speaker Change: China, and the U S and the reciprocal tariffs.
Speaker Change: With each of those countries.
Speaker Change: Right now, obviously, we're going to try and do whatever it is that we can in order to to offset those impacts to the extent possible.
That's taking cost out of the system or potentially trying to find ways to pass along any of those cost increases in.
Speaker Change: The form of pricing.
Speaker Change: Based on what we know right now if we had to provide sort of an estimate for maybe an annualized impact and again keep in mind. This is obviously very very fluid just even given some of the news coming out this morning regarding.
Speaker Change: Regarding the talks this weekend, but if we had if we had to think about like an annualized impact I think it's probably reasonable to think that we would see maybe around <unk>.
Speaker Change: <unk> it.
Speaker Change: $8 million to $9 million impact in 2026 based on what we know right now.
Speaker Change: And Thats obviously.
Speaker Change: Our gross number right that doesn't take into consideration any potential.
Speaker Change: Offsets that we would try and do.
Speaker Change: And it only really relates to sort of the U S. China dynamic it doesn't take into consideration if you will.
Speaker Change: Any of the tariffs that have sort of been put on pause right now.
Jay: Yes incredibly helpful. Jay Thank you for that detail.
Jay: And then I guess I'll ask my follow up I heard you say that.
Jay: And back to head received several pls from generic GOP, one makers very exciting to see that step what does that actually mean, a P. O does that mean, they sort of said hey, we want to work with you and we need to.
Jay: I understand how you're packaging will work so we can.
Jay: Put this together for the regulators or is it a step further than that I'm not sure exactly where that falls in kind of a pharma regulatory.
Jay: Process.
Speaker Change: Yes, good morning, Murray So it is a very exciting and a really important strategic milestone in this process as we've commented before we've been in discussions with multiple Jeanette.
Speaker Change: Generic drug manufacturers as they're pursuing the generic DLP one entry in markets around the world and this is a substantive step forward off them.
Speaker Change: Federal often actually sending purchase orders for bulk pen needles.
Speaker Change: They will then acquire and use for their own internal purposes, including any testing they might have to do as part of their regulatory submissions. So we are very excited about it it's a very tangible and specific milestone.
Speaker Change: That has been accomplished and we certainly share more about all of this.
Speaker Change: On Investor day coming up here in a couple of weeks.
Speaker Change: Okay very good looking forward to it thanks, so much.
Marie: Thank you Marie.
Speaker Change: Thank you Mohammed for next question.
Speaker Change: Our next question comes from the line of Anthony Petrone of Mizuho Financial Group. Your line is now open.
Speaker Change: Thank you and good morning.
Speaker Change: Maybe just a follow up on tariffs.
Speaker Change: Just in terms of pull forward of of of stockpiling.
Speaker Change: Did you notice any of that in the first quarter.
Speaker Change: Any of the retail chain sort of buying ahead.
Speaker Change: And does that sort of flow for <unk>.
Speaker Change: In terms of the revenue performance in the first.
Speaker Change: Quarter here, and then I'll have a couple of.
Speaker Change: Follow ups. Thanks.
Speaker Change: Yes, and then maybe I'll take that.
Speaker Change: Specifically about <unk>.
Speaker Change: Assume you're specifically talking about the U S. Here.
Speaker Change: A couple of points to note right.
Speaker Change: The data that we have incorporated into our guidance are really U S. China related for the majority of the impact vast majority of the impact.
Speaker Change: In the U S.
Speaker Change: We have historically benefited from certain exemptions that applied to finished goods.
Speaker Change: That apply to our category of finished goods.
Speaker Change: So we don't really pay a tariff currently on those products given therefore chronic medical use.
Speaker Change: We did not see any stockpiling in the U S. As a result of potential tariff impact.
Speaker Change: And let me also point out that really the product.
Speaker Change: Coming from China into the U S is very very limited to begin with I mean, it's a low single digit percent of U S revenue so for all those reasons.
Speaker Change: Finished good products being imported into China, and just being imported from China into the U S has been a low low number in our U S onshore U S business and the fact that we do benefit from certain exemptions.
Speaker Change: Us.
Speaker Change: That's helpful. My follow up a bit just stay on the type two market specifically.
Speaker Change: The pump companies out there.
Speaker Change: With a decent quarter here last night, one reported earlier last week reported maybe just like an update on the dynamic between multiple daily injection.
Speaker Change: And pumps, what youre seeing there.
Speaker Change: And if you could segment the marketing type two.
Speaker Change: Where MDI is more sticky.
Speaker Change: Is there a specific segment, where you really just see durability there.
Speaker Change: Thanks.
Speaker Change: Thanks.
Speaker Change: Taking the questions.
Speaker Change: Yes, Anthony the best indicators that we track internally to see what's going on or pen needle business. In particular is the Dr. Access for insulin pens right. That's something that we've been tracking towards a long period of time and so far we've seen stability in the U S.
Speaker Change: Bolton insulin pens as well as what we believe the underlying perennial market to be and obviously, we have better data on insulin pens, then the panel market.
Speaker Change: You just given that we have such a large portion of the pen needle market right. I mean, we see our numbers, but it's hard to get to the total market numbers and so I would say that's the best indicator. Obviously, we follow what module market participants or say I also want to point out just the vastness of the numbers that we're talking about seven 8 billion.
Speaker Change: People on injection in the U S and when you compare it bumped numbers, they're typically talking about maybe tens of thousand so it's going to take some time.
Speaker Change: Before any mix change in before.
Speaker Change: Before any big changes get gets reflected in our numbers not to mentioned that the incidence of type two diabetes, I mean thats still up.
Speaker Change: Still a growth.
Speaker Change: Factor here right. So all these things wash out which is why.
Speaker Change: You indicated that we will still see <unk> as the total prescriptions for insulin pens and we've seen stability so far.
Speaker Change: Thank you very much Jeff.
Speaker Change: Yes.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Again as a reminder to ask a question you will need to press star one on your telephone.
Michael <unk>: And our next question comes from the line of Michael <unk> of Wolfe Research. Your line is now open.
Michael: Hey, good morning, Thank you.
Michael: I have two I want to follow up first on the retail pharmacy store closure callout I feel like U S. Retail pharmacies have been closing stores for a long time so.
Michael: I guess whats.
Michael: About this is it simply the scale and I'm curious if you might name the name I know Walgreens.
Michael: <unk> has announced 200 store closures expected over the next three years, but Cvs also has <unk>.
Michael: Large program too and I think as Steve.
Michael: With BK so.
Michael: If it's worth spiking out the brand I would I would appreciate that but.
Michael: Any further color on why this is different given kind of long running trend of.
Michael: Star Wind Downs.
Speaker Change: Yes, Mike I think it's the scale.
Speaker Change: And respectfully.
Michael: Avoid naming.
Michael: Any specific customers.
Michael: But it's really the scale.
Michael: And the pace at which it could happen. That's the reason why we called it out and like I said, we saw a change in the buying pattern for this distributor that serves that particular chain as well as service of the customers and we just wanted to make sure that we were prudent and reflecting that as we've talked about.
Michael: Our guidance for the rest of the year now.
Michael: As you saw in our guidance I mean in spite of that we did raise our adjusted operating margin and adjusted EBITDA margins guidance, either so everything that we can control to ensure that we still pursue our priorities of maintaining profitability and paying down debt.
Michael: We are absolutely going to execute on.
Michael: Okay.
Michael: For the follow up I want to ask on the new efficiency program that was discussed here.
Michael: Where is it where is it focused what are you doing in the savings number $7 million to $8 million in the second half is it fair to.
Michael: Multiply that by two to get a full year impact as we think about fiscal 'twenty six. Thank you so much.
Speaker Change: Yes, Mike.
Speaker Change: Regarding the regarding the new restructuring program.
Speaker Change: I think if you step back over.
Speaker Change: Over the last several years as we've sort of been separating from from our former parent and standing ourselves up very very intentionally we did not make any.
Speaker Change: Material changes to the organization.
Speaker Change: And we've always talked about how we would look for opportunities to continue to sort of rightsize. The organization to continue to take cost out of the organization and I think now that we are.
Speaker Change: Largely complete with all of the major separation activities.
Speaker Change: We're continuing to look for ways adjusts to become more efficient and we're certainly going to continue to do that moving forward as well. So if you think about the.
Speaker Change: Cost so we were able to take out it's largely.
Speaker Change: I would say in sort of the SG&A.
Speaker Change: Area.
Speaker Change: And I think this year as we said, we would expect to see savings of between $7 million to $8 million in the second half of the year and I do think it's reasonable.
Speaker Change: On an annualized basis to think about something in or around that kind of $15 million Mark as we sort of walk into 2026.
Speaker Change: Thank you.
Speaker Change: Thank you I'm showing no further questions at this time I would like to turn it back to CEO Dev critical for closing remarks.
Speaker Change: Thank you as we close the call I just wanted to express my sincere gratitude to my colleagues at <unk> around the world on a global team remains focused on executing the priorities we've laid out even as uncertainty exists in the macroeconomic and the global trade environment and then finally, we look forward to engaging with all of you are not up.
Speaker Change: In conferences and at our Investor Day on May 20 <unk>.
Speaker Change: We will share more about our vision for them better. Thanks.
Speaker Change: Thanks, again for calling in and for your interest in <unk>.
Speaker Change: Thank you for your participation in today's conference. This concludes the program you may now disconnect.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Okay.