Emergent BioSolutions Inc (EBS) 2025 Q4 法說會逐字稿

Good day and thank you for standing by. Welcome to the Q4 2025 Emergent BioSolutions Inc Earnings conference call.

At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session.

(Operator Instructions)

I would now like to hand the conference over to your first speaker today, Frank Vargo, treasurer. Please go ahead.

Good afternoon, everyone.

Thank you for joining today as Emergent discusses their operational and financial results for the fourth quarter and full year of 2025.

As is customary, today's call is open to all participants. The call is being recorded and is copyrighted by Emergent BioSolutions. In addition to today's press release, there are a series of slides accompanying this webcast available to all webcast participants.

Turning to slide two, during today's call, Emergent may make projections and other forward-looking statements related to their business, future events, and their prospects for future performance. These forward-looking statements are based on their current intentions, beliefs, and expectations regarding future events. Any forward-looking statement speaks only as of the date of this conference call, and, except as required by law. Emergent does not undertake to update any forward-looking statement to reflect new information, events, or circumstances.

Investors should consider this cautionary statement as well as the risk factors identified in emergency periodic reports filed with the SEC when evaluating their forward-looking statements.

During today's call. Emergent may also discuss certain non-GAAP financial measures that involve adjustments to the GAAP figures in order to provide greater transparency regarding emergency operating performance. Please refer to the tables found in today's press release.

Turning to slide three, the agenda for today's call will include Joe Papa, President and Chief Executive Officer, who will provide an update on the company's 2025 business performance and multi-year transformation plan highlights, and Rich Lindahl, EVP and Chief Financial Officer, who will provide details on the fourth quarter and full year 2025 financial results, as well as an update on full year 2026 guidance.

Joe Papa will conclude by discussing the company's key catalysts for growth followed by Q&A.

Finally, for the benefit of those who may be listening to the replay of this webcast, this call was held and recorded on February 26, 2026. Since then, a merchant may have made announcements related to topics discussed during today's call.

And with that, I would now like to turn the call over to Joe Papa. Joe.

Thank you, Frank, and good afternoon to everyone. This is Joe Papa, CEO of Emergent. I'm joined by our CFO, Rich Lindahl.

I'll start with our Multi-Year Transformation Plan progress and topline business results, which will walk through the fourth quarter and full year 2025 financials and provide our 2026 guidance. Before I return to our business outlook and growth drivers, and we'll end with a Q&A.

Turning to slide five. Over the past few years, our emerging team has made substantial progress executing on our multi-year transformation plan, strengthening our financial position through great operating results, strategic divestitures, marginal improvements, and deleveraging through debt repayments.

In 2025, we also returned capital to shareholders through shared purchases and resolved a legacy historical matter with the New York Attorney General's office. I'm proud of the excellent work by our Emergent team for staying focused on our mission to protect and save lives.

In 2026, our priorities are clear. Invest in revenue growth drivers across both the MCM and the Naloxone segments by advancing our internal pipeline and pursuing targeted bolt-on acquisitions and external opportunities that leverage our infrastructure and scale.

Turn to slide seven. In 2025, we delivered strong results, adjusted EBITDA of $205 million primarily driven by our lean, efficient, customer-focused business model, year-end cash of $205 million and net leverage was reduced from 1.9 times from 3.3 times in December of 2024. We secured biodefense contracts in the US and ex-US, with international sales representing 34% of our full year medical countermeasures revenue.

In quarter 4, we maintained market leadership across our Naloxone business while dealing with the US government shutdown which created uncertainty for some of our public interest customers.

Let's look at our MCM business on slide eigth. Our work in biodefense preparedness remains strong, with numerous contract awards and product orders with the US government and international deliveries made to over 20 countries. And just announced today, we've executed a series of new multi-year agreements with the government of Canada valued at CAD140 million to deliver critical medical countermeasures.

And now onto our Naloxone business on Slide nine. CDC data continues to show a meaningful decline in US opioid overdose deaths from 2022 to 2023 peak. We believe access to Naloxone, especially our NARCAN nasal spray 4 mg. As a standard of care remains essential to sustaining this progress. As the market leader in nasal Naloxone across the public interest channel, we continue to invest in access, awareness, and innovation across our NARCAN nasal spray product line to include convenient carrying case designed to be compact, discreet, and easy to carry.

A consumer survey of more than 500 adults reinforced the critical need for this solution. The survey found 74% of consumers prefer a carrying case over standard packaging, and among college students, the population identified as one of the highest risk groups for opioid misuse, this preference rises to 81%.

Additionally, we received FDA approval for two multi-use configurations of NARCAN nasal spray, offering both a six count and a twenty-four count multi-pack option designed to meet the needs of partners distributing higher volumes of Naloxone.

As opioid overdose death rates are declining nationally, we believe in the critical role OTC NARCAN plays in saving lives. Many from the field want to know what is the real-world impact of Naloxone and opioid overdose reversal and saving lives. New York State offers compelling evidence of its effectiveness.

A peer-reviewed analysis from 2023 to March of 2025 found that Naloxone in the last administration saved more than 6,500 lives in over 200,000 years of life in the New York State alone. It's worth noting that recent legislation signed by the New York governor now requires certain private employers to stop an opioid antagonist. Our efforts are aligned as we work hard to ensure businesses are equipped and prepared to respond to an opiate overdose emergency.

We are also very proud of our ongoing work to support Canada and their efforts to help save lives. There have been recent shifts across British Columbia and other provinces to prioritize nasal Naloxone access, and we look forward to continued engagement across Canada.

We cannot afford to lose thousands of innocent lives to the opioid crisis, and we believe our work in collaboration with all stakeholders is essential to reducing the number of lives lost to zero.

So I'd like to turn the call to Rich to walk through the quarter for financial results.

Thanks, Joe. Good afternoon, everyone, and thank you for joining us today. We're excited to share the strong progress we made in 2025 and the continued momentum we're carrying into 2026.

2025 was a year of meaningful advancement for Emergent, one where our transition from stabilization to turnaround gained real traction. Our resilient and strategically positioned portfolio, designed to protect against global public health threats, delivered sustainable revenue, expanded profitability, and powerful cash generation.

These foundational strengths are positioning us for long-term value creation and giving us financial flexibility to pursue attractive growth opportunities.

Throughout the year we achieved substantial financial improvements.

Adjusted EBITDA rose to $205 million, a $22 million or 12% year-over-year increase. Gross margin expanded by an impressive 900 basis points, and we reduced operating expenses by $140 million versus 2024. These results are further highlighted by the improvement of adjusted net income per share from a loss of $0.23 in 2024 to earnings of $1.53 in 2025. These outcomes reflect the strong potential and enhanced competitiveness of our business.

We also significantly strengthened cash generation, reducing both net debt and net leverage while returning capital to shareholders.

Our lean, disciplined operating model continues to support solid profitability and robust cash flow, creating meaningful optionality as we invest in the business and drive shareholder value.

Turning to slide eleven, our fourth quarter performance was generally as expected, although the impacts on public interest customers that Joe described, led to lower than anticipated commercial segment revenues.

Total revenues were $149 million, with MCM tracking squarely to guidance. NARCAN performance was temporarily impacted by software demand amid the prolonged government shutdown and near-term market uncertainty, factors we view as transient and not reflective of the long-term growth potential in this category.

Adjusted EBITDA of $11 million, or an 8% margin, landed at the high end of our guidance.

Adjusted gross margin improved 300 basis points to 43%, driven by product mix and continued operational efficiency.

Operating expenses decreased 10% year over year, underscoring our ongoing commitment to disciplined cost management.

Slide twelve reflects a year of strong execution.

Total revenues were $743 million, remembering that 2024 included $115 million of settlement and divested revenue and despite the revenue decline versus 2024, adjusted EBITDA landed at the high end of guidance, up $22 million or 12% year over year and expanding by 1,000 basis points.

Gross margin improved 900 basis points and operating expenses decreased $140 million or 37%. Even in a lower revenue environment, we delivered meaningful improvements in profitability, reinforcing the solid foundation and operating discipline we've established during the first phase of our multi-year transformation.

Slide thirteen highlights the durability of our revenue base.

Total revenue of $743 million reflects steady performance across MCM, complemented by increasing international momentum, where global MCM sales represented 34% of total revenue and continue to be a growth catalyst.

As expected, US government orders moderated and established a new baseline of demand going forward. Naloxone's full year performance reflected pricing dynamics and the California market impact, along with temporary disruptions that amplify seasonality impacts during the year.

Importantly, we continue to invest in NARCAN's brand strength, product extensions, commercial capabilities, and customer support, reinforcing the long-term health of this franchise.

Other revenue of $60 million aligned to expectations, reflecting the absence of prior one-time items and divested facility revenue.

Slide fourteen showcases a significant improvement across our financial metrics.

We ended 2025 with total liquidity of $305 million, including $205 million in cash and $100 million of undrawn revolver capacity, and this is after making a substantial $100 million voluntary prepayment on our term loan.

Operating cash flow grew to 190% to $171 million.

Net leverage improved to 1.9 times from 3.3 times in the prior year, and adjusted net income per share rose to $1.53, reversing a loss in 2024.

These results reflect not only strong operating execution but also increasing financial flexibility that enhances our ability to drive shareholder value.

On slide fifteen, we highlight the significant steps taken to optimize our capital structure.

During 2025, we paid down $110 million of gross debt, a combination of the $100 million voluntary prepayment against our term loan and the repurchase of $10 million principal amount of our unsecured bonds. These efforts reduced our total debt to $590 million and net debt to $384 million, a 32% and 49% reduction from year end 2023 respectively.

As a result to these efforts, 2025 ending net leverage of 1.9 times improved substantially from 5.7 times in the first quarter of 2024. This progress illustrates how our enhanced cash generating profile supports both accelerated deleveraging and continued investment and growth initiatives, all while maintaining healthy liquidity.

Slide sixteen outlines our consistent capital allocation priorities: growth, debt reduction, and shareholder returns.

In 2025, we strengthened our portfolio through the additions of KLOXXADO and Rocketvax and continued investing in our internal R&D pipeline and international MCM capabilities.

Debt repayment remained a key focus. In addition to our $100 million term loan repayment, we used $8.7 million of cash to repurchase and retire $10.3 million principal amount of our unsecured bonds, and we advanced shareholder returns by repurchasing 3.11 million shares under our stock buyback program.

As announced today, our board has approved a new $50 million authorization through March 31, 2027. We will remain opportunistic with additional share purchases based on market conditions.

Please turn to slide seventeen.

Throughout 2025, we consistently raised guidance, and full year results for adjusted net income, adjusted gross margin, and adjusted EBITDA exceeded the midpoint of our October outlook, while net income was below the range due to the loss on debt extinguishment.

Overall, these outcomes demonstrate our strong execution and proactive cost management even in a lower revenue environment.

Slide nineteen presents our initial 2026 outlook, with total revenues expected in the range of $720 million to $760 million.

MCM revenue is expected to be flat to slightly down, with continued strength in international demand.

Of note, 2025 benefited from an exceptionally strong $60 million international customer order, which we do not currently forecast to repeat in 2026.

Commercial revenues are expected to be flat to slightly up, with volume offsetting the anticipated price adjustments, and we expect NARCAN to maintain its leading market share.

Adjusted gross margin is expected to land between 45% and 47%, reflecting product mix and expected pricing dynamics.

Adjusted EBITDA is anticipated to be between $135 million to $155 million. To put this guidance in context, note that the one-time international order I just referenced contributed $50 million of adjusted EBITDA in 2025.

Net income is expected to be between a loss of $30 million and a loss of $10 million, with adjusted net income between $25 million and $45 million. We anticipate a healthy start to the year, with first quarter revenue of $135 million to $155 million.

Of note, we also expect that revenues in the first half of the year will represent about 40% of the full year total.

In closing, please turn to slide twenty.

The 2025 year was a year of consistent execution, expanding profitability, and material progress towards our transformation goals. Our lean and focused operating model delivered higher gross margins, stronger profitability, and robust cash flow, fueling debt reduction and shareholder returns. With net leverage below 2 times, strong liquidity, and meaningful operating momentum entering 2026, we are well positioned to build on this progress and drive compelling long-term value for our shareholders.

With that, I'll now turn the call back to Joe.

Thank you, Rich.

Turning to slide twenty-two, as part of our mission to protect and save lives, we develop and deliver highly complex products that address some of the world's most pressing public health threats like smallpox, anthrax, botulism, and Ebola.

As the market leader nasal Naloxone, we are deeply steeped in the evolving nature of the opioid crisis.

We believe every medicine cabinet, first aid kit, and person should have NARCAN on him.

Onto our Incremental (inaudible) biodefense work for today and the future, the risk of bioterror and public health threats is rising. Our proprietary survey insights show how policy leaders view bioterror as easier to carry out than nuclear attacks. Fortunately, we have strong bipartisan support for US leadership in biodefense.

On slide twenty-three, you'll see a summary of the government funding and several international commitments, which demonstrate stability and provide the merchant with an opportunity to engage meaningfully with our customers and partners.

Of note, US government spend is rising in 2026 across all major federal programs, including BARDA, Project BioShield, Strategic National Stockpile, and State Opioid Response, reinforcing a strong and sustained commitment to UN preparedness.

International investment is also rising, with the EU's program and NATO allies boosting their readiness budgets. It's also worth noting that more than $50 billion in US class action opioid settlement dollars, an additional funding stream, will be available to address the opioid crisis over the next eight to ten years.

Moving to slide twenty-four, in 2026 we outlined our outlook on future growth and cash deployment. Our plan remains on track to selectively invest the cash we are generating from our profitable business segments into two key initiatives: organic internal growth and inorganic initiatives for business development and external partnerships.

We'll continue to invest in international MCM expansion efforts geographically and pursue Naloxone innovation opportunities.

Slide twenty-five takes a closer look at our life cycle initiatives with TEMBEXA, Ebanga, and raxibacumab, as well as the pipeline focus areas.

In summary, on slide twenty-six, we achieved many key milestones in the fourth quarter and throughout 2025, including operating performance, cash generation, and debt reduction.

We are confident in our ability to execute on our core business and long-term growth initiatives while ensuring continued improvement in operational profitability as we advance our transformation.

We remain committed to the highest standards of quality, ethics, and compliance, and we look forward to the years ahead.

Operator, please open up the line for questions.

Thank you. At this time, we will conduct the question-and-answer session.

(Operator Instructions)

I am showing no questions at this time. I would now like to turn the call back to Joe Papa, CEO, for closing remarks.

Well, thank you.

Thank you, everyone, for joining us today. I think that the presentation was clear, straightforward, and, answered questions that people had anticipated. So, we very much appreciate everyone's attendance today.

Thank you very much. Look forward to speaking with many of you in the near future.

Thank you. Have a great day, everyone.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.