Elanco Animal Health Incorporated · NYSE:ELAN
Elanco Animal Health — Q4 2023 Earnings Presentation
42 slides from Elanco Animal Health's earnings presentation, Feb 26, 2024
Slide 1: 2023 Earnings – Fourth Quarter
2023 Earnings – Fourth Quarter February 26, 2024
Slide 2: Notices and Disclaimers
2023 | Q4 Earnings Notices and Disclaimers Forward-Looking Statements. This presentation contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements concerning product launches and revenue from such products, our 2024 full year and
Slide 3: On Today's Call
2023 | Q4 Earnings On Today’s Call Jeff Simmons Todd Young Elanco Animal Health Elanco Animal Health President and Chief Executive Vice President, Executive Officer Chief Financial Officer 3
Slide 4: Topline Growth Continues, Positive Set Up for 2024
2023 | Q4 Earnings Topline Growth Continues, Positive Set Up for 2024 Topline Growth Continues 5% fourth quarter CC2 growth, contributing to 1% full year CC2 growth Expect 1%-3% CC2 growth in 2024, before upside from new innovation 2023 Full Year Results Innovation On-Track 2023 Innovation revenue a
Slide 5: Return to Constant Currency Growth of 1%, Led by Farm Animal
2023 | Q4 Earnings 2022 to 2023 Full Year Revenue Bridge Return to Constant Currency Growth of 1%, Led by Farm Animal $ in millions 4% Growth Growth rates shown in constant currency (CC)1 Compare to flat in 2022 4% Growth +1% Growth $4,417 $4,411 FX 1% Decline Compare to 5% decline in 2022 $(58)M 4%
Slide 6: Innovation, Portfolio, Productivity Highlights
2023 | Q4 Earnings Innovation Innovation Sales Late-Stage Pipeline CPMA (Parvo) delivered $275M in for Credelio Quattro 1, expanded 2023, or 3ppt of growth, Zenrelia 1, Bovaer®1 manufacturing more than 2x 2022 submitted and under capacity completed FDA regulatory review IPP Po Innovation, it on Port
Slide 7: Progress and Outlook for Elanco's Next Era of Growth
2023 | Q4 Earnings Preparing for a historic innovation launch window through 2025 Progress and Outlook for Elanco’s Next Era of Growth Primary Peak Sales Asset Regulator Species Initial Submission1 Approval2 Launch1 Opportunity3 Commentary Experior FDA (Rx) First-in-class Ammonia Reduction Bexacat F
Slide 8: Agreement to Sell Aqua Business
2023 | Q4 Earnings Agreement to Sell Aqua Business Reinforces Commitment Expect High-3x to Low-4x to Larger Markets $1.3B Net Leverage by YE 2025 with Greater Earnings Purchase Price Accelerates deleveraging Potential All cash deal, with driven by net proceeds and expected $1.05B to improving cash f
Slide 9: 2024 Guidance | Revenue Growth for Both Pet Health and Farm Animal
2023 | Q4 Earnings 2024 Guidance | Revenue Growth for Both Pet Health and Farm Animal, Improved Cash Flow and Investments to Drive Launches Tailwinds Headwinds Existing innovation ramp and new launches Competition in U.S. Pet Health vet clinic business Expanded physical availability in pet retail Fa
Slide 10: Financial Results
Financial Results Fourth Quarter 2023
Slide 11: Constant Currency Growth of 5%, Led by Farm Animal
2023 | Q4 Earnings Q4 2022 to Q4 2023 Revenue Bridge Constant Currency Growth of 5%, Led by Farm Animal $ in millions 10% Growth Growth rates shown in constant currency (CC)1 Compare to 3% decline in 2022 3% Growth 5% Growth 28% Growth $1,035 1% Decline Compare to 11% decline in 2022 5% Decline 4% G
Slide 12: Impact of Price, Rate, and Volume on Revenue
2023 | Q4 Earnings Fourth Quarter 2023 Impact of Price, Rate, and Volume on Revenue Revenue Price FX Rate Volume Total CC Change1 Pet Health $416 3% 1% (4)% (1)% (1)% Cattle $249 0% 12% 11% Poultry $220 (2)% 18% 19% Swine $98 2% (2)% (3)% Aqua $43 2% (0)% (5)% Farm Animal $610 4% 0% 6% 10% 10% Contr
Slide 13: Revenue by Geography and Species
2023 | Q4 Earnings Fourth Quarter 2023 Revenue by Geography and Species 2023 2022 Change CC Change1 US Pet Health $247 $260 (5)% (5)% Int’l Pet Health $169 $161 6% 4% Total Pet Health $416 $420 (1)% (1)% US Farm Animal $211 $165 28% 28% Int’l Farm Animal $399 $388 3% 3% Total Farm Animal $610 $552 1
Slide 14: Adjusted Income Statement Highlights
2023 | Q4 Earnings Fourth Quarter 2023 Adjusted1 Income Statement Highlights $ millions, except per share values 2023 2022 Change ($) Change (%) Revenue $1,035 $985 $50 5% Cost of Sales $516 $448 $68 15% Adjusted Gross Profit $519 $537 $(18) (3)% Adjusted Gross Margin 50.1% 54.5% (440) bps Operating
Slide 15: Adjusted EBITDA and Adjusted EPS Performance Impacted by Argentina Devaluation & Higher Tax
2023 | Q4 Earnings Q4 2023 Compared to Guidance Adjusted EBITDA and Adjusted EPS Performance Impacted by Argentina Devaluation & Higher Tax Q4 Adjusted EBITDA Q4 Adjusted EPS $ millions ~$19 ~$(11) ~$6 ~$(18) $0.07 – $0.13 ~$(0.01) $(4) ~$0.00 ~$(0.01) $(0.02) $151 – $186 vs. Midpoint ~$(0.03) from
Slide 16: Adjusted Income Statement Highlights
2023 | Q4 Earnings Full Year 2023 Adjusted1 Income Statement Highlights $ millions, except per share values 2023 2022 Change ($) Change (%) Revenue $4,417 $4,411 $6 0% Cost of Sales $1,929 $1,913 $16 1% Adjusted Gross Profit $2,488 $2,498 $(10) (0)% Adjusted Gross Margin 56.3% 56.6% (30) bps Operati
Slide 17: Adjusted EBITDA and Adjusted EPS Decline as Investments Increase
2023 | Q4 Earnings 2022 to 2023 Full Year Bridge Adjusted EBITDA and Adjusted EPS Decline as Investments Increase and Non-Operational Currency Headwinds Persist 2023 Adjusted EBITDA 2023 Adjusted EPS $ millions $1.11 $0.00 $(0.07) $1,017 $1 $(17) $(0.09) $(21) $(0.05) $(0.22) vs. Prior Year $(37) vs
Slide 18: Key Balance Sheet and Cash Flow Metrics
2023 | Q4 Earnings Key Balance Sheet and Cash Flow Metrics Debt Balances as of December 31, 2023 Operating Cash Flow (OCF) of $157M in Q4 2023; $ millions Year over year increase of $144M primarily driven by improved inventory performance. $76M of Debt Paydown in 2023; Adjusted net leverage ratio2 d
Slide 19: Financial Guidance
Financial Guidance First Quarter and Full Year 2024
Slide 20: Financial Guidance
2023 | Q4 Earnings 2024 Full Year Financial February Comments Guidance Revenue $4,450 - $4,540 Expect 1% to 3% growth in constant currency Reported Net Loss $(62) - $(17) $ millions, except Adjusted EBITDA1 $960 - $1,010 Topline growth offset by strategic investments per share values Reported Dilute
Slide 21: Expect CC Revenue Growth of 1% to 3% Led by Innovation
2023 | Q4 Earnings 2023 to 2024 Full Year Revenue Bridge Expect CC Revenue Growth of 1% to 3% Led by Innovation, Even Before Potential Upside from Late-Stage Pipeline ~2%-4% Growth 1% - 3% $ millions CC1 Growth $4,450- ~Flat ~1% Decline $4,417 $15-$55 $4,540 $4,412 $4,417 ~$(50) $75-$125 2023 FX 202
Slide 22: Adjusted EBITDA Expected to Benefit from Higher Sales, Offset by Gross Margin Headwinds
2023 | Q4 Earnings 2023 to 2024 Full Year Bridge Adjusted EBITDA Expected to Benefit from Higher Sales, Offset by Gross Margin Headwinds and Opex Investment 2024 Adjusted EBITDA 2024 Adjusted EPS $ millions ~$80 ~$(40) +$0.02 vs. Prior Year at Mid-Point ~$0.01 of Guidance ~$(30) ~$0.01 ~$0.00 $0.87-
Slide 23: Financial Guidance
2023 | Q4 Earnings First Quarter 2024 Financial Q1 Guidance Comments Guidance Revenue $1,160 - $1,185 Expect 1% to 3% growth in constant currency2, excluding $90-$110 million impact from ERP3 in 2023 Reported Net Loss $(34) - $(13) $ millions, except Including $20-$25 million incremental investment
Slide 24: Adjusted EBITDA and Adjusted EPS Declines Impacted by Prior Year ERP Blackout
2023 | Q4 Earnings Q1 2023 to Q1 2024 Bridge Adjusted EBITDA and Adjusted EPS Declines Impacted by Prior Year ERP Blackout, Manufacturing Slowdown and Pet Health Investments Q1 2024 Adjusted EBITDA Q1 2024 Adjusted EPS $ millions ~$(70)- ~$(0.14)- ($90) $(0.11) $379 $(0.05) $(34) $0.45 vs. Prior Yea
Slide 25: Factors Impacting Cash Flow and Leverage
2023 | Q4 Earnings Factors Impacting Cash Flow and Leverage 2024 2024 $ millions 2021 2022 2023 Projected Comments Lower project spend partially Project1/Restructuring Cash $325 $194 $149 $40 - $50 offset by Q1 2024 restructuring Cash Interest $221 $266 $379 Approx. $350 Cash Taxes $151 $93 $95 $80
Slide 26: Appendix
Appendix Reference slides and GAAP reported to non-GAAP adjusted reconciliations
Slide 27: Impact of Price, Rate, and Volume on Revenue
2023 | Q4 Earnings Full Year 2023 Impact of Price, Rate, and Volume on Revenue Revenue Price FX Rate Volume Total CC Change1 Pet Health $2,104 4% (1)% (5)% (2)% (1)% Cattle $949 (1)% 1% 2% Poultry $765 (3)% 7% 10% Swine $382 (2)% (1)% 1% Aqua $175 2% 0% (2)% Farm Animal $2,271 4% (2)% 0% 2% 4% Contr
Slide 28: Revenue by Geography and Species
2023 | Q4 Earnings Full Year 2023 Revenue by Geography and Species 2023 2022 Change CC Change1 US Pet Health $1,242 $1,250 (1)% (1)% Int’l Pet Health $862 $888 (3)% (1)% Total Pet Health $2,104 $2,138 (2)% (1)% US Farm Animal $729 $699 4% 4% Int’l Farm Animal $1,542 $1,520 1% 4% Total Farm Animal $2
Slide 29: Revenue Performance by Top Ten Countries
2023 | Q4 Earnings Full Year 2023 Revenue Total % of Total CC Change1 United States $1,971 45% 1% Performance by China $221 5% 4% Top Ten Brazil $183 4% 11% Countries United Kingdom $156 4% 11% Canada $116 3% 5% Italy $114 3% (3)% Mexico $112 3% (3)% France $105 2% 10% Australia $93 2% (15)% Japan $
Slide 30: Revenue Performance for Select Products
2023 | Q4 Earnings Full Year 2023 Revenue 2023 Revenue % of Total CC Change1 Performance for Select $431 10% (3)% Products $331 7% (4)% $248 6% 1% $241 5% 16% 2 $195 4% 23% $82 2% (21)% Note: Reported revenue in millions. Numbers may not add due to rounding. 1Constant Currency (CC) is a non-GAAP fin
Slide 31: Confident in Liquidity and Ability to Manage Debt Obligations
2023 | Q4 Earnings Confident in Liquidity and Ability to Manage Debt Obligations Debt Maturities & Mandatory Payments Key Debt Information1 $ millions Total Gross Debt: $5.8 billion $3,000 • Term Loans: $4.7 billion; bears interest of 1-Month Term SOFR+185 bps • Senior Notes: $750 million; bears int
Slide 32: Financial Guidance & Additional Assumptions
2023 | Q4 Earnings Full Year 2024 February Financial Total Revenue $4,450 – $4,540 Guidance Gross Margin 55.9% – 56.5% & Additional Operating Expenses $1,650 – $1,675 Assumptions Adjusted EBITDA1 $960 – $1,010 Adjusted EBITDA Margin1 21.6% – 22.2% $ millions, except Depreciation Approx. $135 per sha
Slide 33: Adjusted EBITDA Reconciliation
2023 | Q4 Earnings Fourth Quarter 2023 Adjusted 2023 2022 EBITDA Reconciliation Reported Net Loss $(141) $(55) Net Interest Expense $67 $62 Income Tax Expense $14 $(35) $ millions Depreciation and Amortization $171 $169 EBITDA $111 $141 Non-GAAP Adjustments Cost of Sales $0 $0 Asset Impairment, Rest
Slide 34: Reconciliation of GAAP Reported to Non-GAAP Adjusted Income Statement Items
2023 | Q4 Earnings Fourth Quarter 2023 Reconciliation of GAAP 2023 2022 Reported to GAAP Reported Adjusted Items Non- GAAP GAAP Reported Adjusted Items Non- GAAP Non-GAAP Amortization of Intangible Assets $138 $138 $0 $130 $130 $0 Adjusted Asset Impairment, Restructuring $36 $36 $0 $32 $32 $0 Income
Slide 35: Details of Adjustments to Certain GAAP Reported Measures
2023 | Q4 Earnings Fourth Quarter 2023 Details of For the three months ended December 31, 2023 and 2022: 1) Adjustments of $36 million for the three months ended December 31, 2023, related primarily to a $26 million impairment of a contract asset Adjustments to we initially recorded in 2022 related
Slide 36: Adjusted EBITDA Reconciliation
2023 | Q4 Earnings Full Year 2023 Adjusted 2023 2022 EBITDA Reconciliation Reported Net Loss $(1,231) $(78) Net Interest Expense $277 $241 Income Tax Expense $36 $6 $ millions Depreciation and Amortization $694 $682 EBITDA $(224) $851 Non-GAAP Adjustments Cost of Sales $2 $0 Asset Impairment, Restru
Slide 37: Reconciliation of GAAP Reported to Non-GAAP Adjusted Income Statement Items
2023 | Q4 Earnings Full Year 2023 Reconciliation of GAAP 2023 2022 Reported to GAAP Reported Adjusted Items Non- GAAP GAAP Reported Adjusted Items Non- GAAP Non-GAAP Cost of Sales1 $1,931 $2 $1,929 $1,913 $0 $1,913 Adjusted Amortization of Intangible Assets $548 $548 $0 $528 $528 $0 Income Asset Imp
Slide 38: Details of Adjustments to Certain GAAP Reported Measures
2023 | Q4 Earnings Full Year 2023 Details of For the year ended December 31, 2023 and 2022: 1) Adjustments of $2 million for the year ended December 31, 2023, related to the amortization of inventory fair value adjustments recorded from the acquisition of certain Adjustments to assets of NutriQuest
Slide 39: EBITDA Guidance Reconciliation
2023 | Q4 Earnings Full Year 2024 EBITDA Reported Net Loss $(62) - $(17) Guidance Net Interest Expense Approx. $280 Reconciliation Income Tax Provision $(17) - $29 Depreciation and Amortization Approx. $685 $ millions EBITDA $886 - $976 Non-GAAP Adjustments Asset Impairment, Restructuring, and Other
Slide 40: EPS Guidance Reconciliation
2023 | Q4 Earnings Full Year 2024 EPS Guidance Reconciliation Reported Loss per Share $(0.12) - $(0.03) Amortization of Intangible Assets Approx. $1.11 Asset Impairment, Restructuring, and Other Special Charges $0.07 - $0.15 Subtotal $1.18 - $1.26 Tax Impact of Adjustments $(0.26) - $(0.19) Total Ad
Slide 41: EBITDA Guidance Reconciliation
2023 | Q4 Earnings First Quarter 2024 EBITDA Reported Net Loss $(34) - $(13) Guidance Net Interest Expense Approx. $70 Reconciliation Income Tax Provision $(2) - $7 Depreciation and Amortization Approx. $170 $ millions EBITDA $203 - $232 Non-GAAP Adjustments Asset Impairment, Restructuring, and Othe
Slide 42: EPS Guidance Reconciliation
2023 | Q4 Earnings First Quarter 2024 EPS Guidance Reconciliation Reported Loss per Share $(0.07) - $(0.03) Amortization of Intangible Assets Approx. $0.28 Asset Impairment, Restructuring, and Other Special Charges $0.09 - $0.11 Subtotal $0.37 - $0.39 Tax Impact of Adjustments $(0.07) - $(0.06) Tota