Elanco Animal Health Incorporated · NYSE:ELAN
Elanco Animal Health — Q1 2023 Earnings Presentation
32 slides from Elanco Animal Health's earnings presentation, May 9, 2023
Slide 1: 2023 Earnings – First Quarter
2023 Earnings – First Quarter May 9, 2023
Slide 2: Notices and Disclaimers
Notices and Disclaimers Forward-Looking Statements. This presentation contains forward-looking statements, including, without limitation, statements concerning our 2023 full year, second quarter and first half guidance, our long-term revenue and earnings growth expectations, expectations regarding r
Slide 3: On Today's Call
On Today’s Call Jeff Simmons Todd Young Elanco Animal Health Elanco Animal Health President and CEO Executive Vice President, Chief Financial Officer © 2023 Elanco or its affiliates 3
Slide 4: Elanco Looks Toward Stabilization and Inflection
Elanco Looks Toward Stabilization Improved Outlook Raising bottom end of H1 and Full Year 2023 guidance based and Inflection on progress on milestones and increased confidence in innovation, U.S. Pet Health and international poultry businesses Progress on Milestones ERP integration complete, Parvo c
Slide 5: Sequential Improvement in the Base Business Paired with Estimated Benefit from ERP Blackout
Q1 2022 to 2023 Revenue Bridge Sequential Improvement in the Base Business Paired with Estimated Benefit from ERP Blackout $ in millions ~7-9% Growth 6% ~3% Decline CC Growth(1) ~1-3% Decline ~($40) $90 - $110 $1,257 $1,226 ~$(20)-(40) Compared to 7% CC Decline(1) in Q4’22 Q1 2022 FX Rates Base Esti
Slide 6: Innovation, Portfolio, Productivity Highlights Since Last Earnings Call
Innovation Parvo Approved OTC Launches Late-Stage Pipeline USDA conditional 3 of 3 new OTC Initiated U.S. submission approval received; products: Adtab of IL-31 mAB for canine Elanco’s 1st mAB (EU) approved dermatology IPP Portfolio Innovation, Seresto Progress Aligning on EPA’s Price Growth +5%, im
Slide 7: Progress and Outlook for Elanco's Next Era of Growth
Preparing for a historic innovation launch window in ‘23 and ‘24 Progress and Outlook for Elanco’s Next Era of Growth Regulatory Product Initial Peak Sales Asset Agency Species Development Submission(1) Approval(2) Launch(1) Opportunity(3) Commentary Experior FDA (Rx) First-in-class Ammonia Reductio
Slide 8: Financial Results
Financial Results First Quarter 2023
Slide 9: Impact of Price, Rate, and Volume on Revenue
First Quarter 2023 Impact of Price, Rate, and Volume on Revenue Revenue Price FX Rate Volume Total CC Change(1) Pet Health $675 5% (3)% 3% 5% 8% Cattle $248 (3)% 0% 4% Poultry $183 (4)% 2% 6% Swine $102 (6)% 3% 9% Aqua $40 (2)% (7)% (5)% Farm Animal $573 5% (4)% 0% 1% 5% Contract Manufacturing $9 -
Slide 10: Revenue by Geography and Species
First Quarter 2023 Revenue by Geography and Species Estimated ERP 2023 2022 Change CC Change(1) Blackout Benefit US Pet Health $361 $323 12% 12% ~12% Int’l Pet Health $314 $318 (1)% 5% ~11% Total Pet Health $675 $640 5% 8% 10% to 12% US Farm Animal $182 $193 (6)% (6)% ~2% Int’l Farm Animal $391 $375
Slide 11: Adjusted Income Statement Highlights
First Quarter 2023 Adjusted(1) Income Statement Highlights Estimated ERP $ millions, except per share values 2023 2022 Change ($) Change (%) Blackout Benefit Revenue $1,257 $1,226 $31 3% $90 to $110 Cost of Sales $493 $509 $(16) (3)% Adjusted Gross Profit $764 $717 $47 7% $70 to $90 Adjusted Gross M
Slide 12: Key Balance Sheet and Cash Flow Metrics
Key Balance Sheet and Cash Flow Metrics Debt Balances as of March 31, 2023 $ millions Operating Cash Flow (OCF) of $(145)M in Q1 2023; Year over year decline driven by higher cash interest expense and higher inventory levels. Gross debt increased $180 million in Q1 2023 due to planned draw on revolv
Slide 13: Financial Guidance
Financial Guidance First Half and Full Year 2023
Slide 14: Financial Guidance: 2023 Full Year
2023 Full Year Financial February May Comments Guidance Revenue $4,280 - $4,400 $4,310 - $4,400 Raised bottom end by $30M Reported Net Income $(157) - $(109) $(134) - $(98) $ millions, except Adjusted EBITDA(1) $920 - $1,000 $940 - $1,000 Raised bottom end by $20M per share values Reported Diluted E
Slide 15: Financial Guidance: First Half & Second Quarter 2023
First Half & Second Quarter 2023 Financial First Half | February First Half | May Second Quarter | May Guidance Total Revenue $2,230 – $2,310 $2,260 – $2,310 $1,003 – $1,053 Reported Net Income $(53) – $(22) $(47) – $(25) $(150) – $(128) $ millions, except per share values Adjusted EBITDA(1) $490 –
Slide 16: Stabilization in Base Business with Estimated Unwind of ERP Blackout in Q2
Q1 & Q2 2022 to 2023 Revenue Bridges Stabilization in Base Business with Estimated Unwind of ERP Blackout in Q2; H1 CC decline ~2-4% First Quarter Second Quarter $ millions $ millions ~7-9% ~3% Growth 6% Decline CC Change(1) ~1-3% ~1% Decline $1,257 Decline ~1-4% ~$90- Decline ~8-9% $1,226 $110 Decl
Slide 17: Expect Second Half Return to Growth as Reflected in Full Year Revenue Guidance
2022 Actual and 2023 Guidance Revenue Change by Half Expect Second Half Return to Growth as Reflected in Full Year Revenue Guidance, Supported by Improving Leading Indicators Revenue Year-over-year CC (1) Change 2022: 3% Decline 2023: Flat to 2% Decline Drivers of H2’23 Improvement: Innovation Ramp
Slide 18: Appendix
Appendix Reference slides and GAAP reported to non-GAAP adjusted reconciliations
Slide 19: Current Debt Profile
Current Debt Profile Debt Maturities & Mandatory Payments Key Debt Information(1) Interest Rate Swaps: $3 billion matures in 2025; 65% to 70% of debt $ millions remains fixed throughout 2023 and 2024 $3,000 Term Loans: $4.8 billion; bears interest of 1-Month Term SOFR+185 bps $2,000 Revolver: Access
Slide 20: Meaningful Reduction in Project Cash Expected to Begin in 2024
Meaningful Reduction in Project Cash Expected to Begin in 2024 Estimated Project Cash Costs Factors Impacting Operating Cash Flow $ millions $ millions $325 2021 2022 2023 2024+ $940 – $210 Adj. EBITDA $1,059 $1,017 $194 $1,000 $140-$160 $126 $140 – Project Cash Costs $325 $194 $160 $390 – <$20 Cash
Slide 21: Financial Guidance: Full Year 2023
Full Year 2023 February May Financial Total Revenue $4,280 – $4,400 $4,310 – $4,400 Guidance Adjusted Gross Margin(1) 55.7% – 56.4% 56.3% – 56.9% & Additional Operating Expenses $1,580 – $1,605 $1,595 – $1,605 Assumptions Adjusted EBITDA(1) $920 – $1,000 $940 – $1,000 Adjusted EBITDAMargin(1) 21.5%
Slide 22: Q2 Adj. EBITDA Impacted by ERP Blackout Unwind, Lower Sales Volumes, and Increased Investments
Q2 2022 to 2023 Adj. EBITDA Bridge Q2 Adj. EBITDA Impacted by ERP Blackout Unwind, Lower Sales Volumes, and Increased Investments $304 ~$(35) ~$(35) ~$(75) ~$(5) ~$(70) - $(90) vs. 2022 at Midpoint Excluding ERP Blackout $131 - $161 Q2 2022 Revenue Flow- Operating Impact of ERP Blackout Q2 2023 Thro
Slide 23: Q2 Adjusted EPS Impacted by Unwind of ERP Blackout
Q2 2022 to 2023 Adj. EPS Bridge Q2 Adjusted EPS Impacted by Unwind of ERP Blackout, EBITDA Flow Through & Non-Operational Items $0.10 Non-Operational Headwinds $0.39 ~$(0.13) ~$(0.05) ~$(0.04) ~$(0.23) vs. 2022 ~$(0.01) at Midpoint Excluding ERP Blackout ~$(0.11) - $(0.14) $0.00 - $0.05 Q2 2022 Adj.
Slide 24: Adjusted EBITDA Reconciliation
First Quarter 2023 Adjusted 2023 2022 EBITDA Reconciliation Reported Net Loss $103 $51 Net Interest Expense $64 $52 Income Tax Expense $5 $24 $ millions Depreciation and Amortization $173 $176 EBITDA $344 $303 Non-GAAP Adjustments Cost of Sales $1 $0 Asset Impairment, Restructuring, and Other Specia
Slide 25: Reconciliation of GAAP Reported to Non-GAAP Adjusted Income Statement Items
First Quarter 2023 Reconciliation 2023 2022 of GAAP GAAP Adjusted Non- GAAP Adjusted Non- Reported to Reported Items GAAP Reported Items GAAP Non-GAAP Cost of Sales(1) $494 $1 $493 $509 $0 $509 Adjusted Amortization of Intangible Assets $134 $134 $0 $137 $137 $0 Income Asset Impairment, Restructurin
Slide 26: Details of Adjustments to Certain GAAP Reported Measures
First Quarter 2023 Details of For the three months ended March 31, 2023 and 2022: Adjustments to 1) 2023 excludes amortization of inventory fair value adjustments recorded from the acquisition of certain assets of Certain GAAP NutriQuest, LLC ($1 million). 2) 2023 primarily excludes charges associat
Slide 27: EBITDA Guidance Reconciliation: Full Year 2023
Full Year 2023 EBITDA Reported Net Loss $(134) - $(98) Guidance Reconciliation Net Interest Expense Approx. $315 Income Tax Provision $(17) - $16 $ millions Depreciation and Amortization Approx. $690 EBITDA $841 - $921 Non-GAAP Adjustments Income Tax Expense Approx. $1 Asset Impairment, Restructurin
Slide 28: EPS Guidance Reconciliation: Full Year 2023
Full Year 2023 EPS Guidance Reconciliation Reported Loss per Share $(0.27) - $(0.20) Amortization of Intangible Assets Approx. $1.08 Asset Impairment, Restructuring, and Other Special Charges (1) $0.18 - $0.22 Subtotal $1.26 - $1.30 Tax Impact of Adjustments $(0.28) - $(0.23) Total Adjustments to Ea
Slide 29: EBITDA Guidance Reconciliation: First Half 2023
First Half 2023 EBITDA Reported Net Loss $(47) - $(25) Guidance Reconciliation Net Interest Expense Approx. $140 Income Tax Provision $(8) - $8 $ millions Depreciation and Amortization Approx. $350 EBITDA $437 - $476 Non-GAAP Adjustments Income Tax Expense Approx. $1 Asset Impairment, Restructuring,
Slide 30: EPS Guidance Reconciliation: First Half 2023
First Half 2023 EPS Guidance Reconciliation Reported Loss per Share $(0.10) - $(0.05) Amortization of Intangible Assets Approx. $0.54 Asset Impairment, Restructuring, and Other Special Charges (1) $0.15 - $0.17 Subtotal $0.69 - $0.71 Tax Impact of Adjustments $(0.16) - $(0.14) Total Adjustments to E
Slide 31: EBITDA Guidance Reconciliation: Second Quarter 2023
Second Quarter 2023 EBITDA Reported Net Loss $(150) - $(128) Guidance Reconciliation Net Interest Expense Approx. $76 Income Tax Provision $(13) - $3 $ millions Depreciation and Amortization Approx. $177 EBITDA $93 - $132 Non-GAAP Adjustments Asset Impairment, Restructuring, and Other Special Charge
Slide 32: EPS Guidance Reconciliation: Second Quarter 2023
Second Quarter 2023 EPS Guidance Reconciliation Reported Loss per Share $(0.31) - $(0.26) Amortization of Intangible Assets Approx. $0.27 Asset Impairment, Restructuring, and Other Special Charges (1) $0.07 - $0.09 Other Expense Approx. $0.01 Subtotal $0.34 - $0.36 Tax Impact of Adjustments $(0.03)