Elanco Animal Health Incorporated · NYSE:ELAN
Elanco Animal Health — Q2 2024 Earnings Presentation
41 slides from Elanco Animal Health's earnings presentation, Aug 8, 2024
Slide 1: 2024 Earnings – Second Quarter
2024 Earnings – Second Quarter August 8, 2024
Slide 2: Notices and Disclaimers
2024 | Q2 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
2024 | Q2 Earnings On Today’s Call Jeff Simmons Todd Young Elanco Animal Health Elanco Animal Health President and CEO Executive Vice President, Chief Financial Officer 3
Slide 4: Topline Momentum, Innovation Progress Continues
2024 | Q2 Earnings Topline Momentum, Momentum & Execution on Topline Innovation Progress Excluding the ERP blackout in 2023, Q2 CC3 growth estimated at 3%-4%; 4th consecutive quarter of mid-single digit growth Continues Innovation Progress Innovation revenue of $209M in H1; launch activities underwa
Slide 5: Constant Currency Revenue Growth of 4%, Building on Momentum
2024 | Q2 Earnings H1 2023 to H1 2024 Revenue Bridge Constant Currency Revenue Growth of 4%, Building on Momentum from 5% Growth in H2 2023 Revenue $ millions 4% Growth 2% 5% Growth 17% Growth 4% Growth Flat Growth $2,389 11% Growth 3% Decline $2,314 H1 2023 FX Rates H1 2024 Actual & CMO US Int’l US
Slide 6: Innovation, Portfolio and Productivity Highlights
2024 | Q2 Earnings Innovation Innovation Sales Bovaer® FDA review Zenrelia final approval delivered $109M in Q2, completed in May, expected in Q3 2024; or 5ppt of growth, led launch activities Credelio Quattro final by Experior, AdTab and underway, feeding approval expected in Q4 CPMA expected in Q3
Slide 7: On-Track to Deliver $600M-$700M Contribution in 2025
2024 | Q2 Earnings Innovation revenue expectations increased to $400M-$450M in 2024 On-Track to Deliver $600M-$700M Contribution in 2025 $ millions $400-$450 Key Product Approvals & Launches $120 $109 $275 Pet Health Farm Animal $100 $80 $133 $60 2021 $60 $72 Pet Health Total 2022 $40 $28 $22 $20 20
Slide 8: Progress and Outlook for Elanco's Next Era of Growth
2024 | Q2 Earnings Historic innovation launch window through 2025 Progress and Outlook for Elanco’s Next Era of Growth Primary Initial Peak Sales Asset Regulator Species Submission1 Approval2 Launch1 Opportunity3 Commentary Experior FDA (Rx) First-in-class Ammonia Reduction Bexacat FDA (Rx) Q4 2022
Slide 9: Updates for Key Late-Stage Innovation Products
2024 | Q2 Earnings Updates for Key Late-Stage Innovation Products Zenrelia Credelio Quattro A JAK inhibitor targeting control of A broad spectrum oral parasiticide A first-in-class methane reducing pruritus and atopic dermatitis in dogs covering fleas, ticks and internal parasites feed ingredient fo
Slide 10: Financial Results
Financial Results Second Quarter 2024
Slide 11: Impact of Price, Rate, and Volume on Revenue
2024 | Q2 Earnings Second Quarter 2024 Impact of Price, Rate, and Volume on Revenue1 Revenue Price FX Rate Volume Total CC Change2 Pet Health $579 3% (1)% 10 % 12 % 13 % Cattle $257 0% 22 % 22 % Poultry $198 (3)% 11 % 14 % Swine $90 (1)% 1% 2% Aqua $49 (2)% (2)% 0% Farm Animal $594 4% (1)% 10 % 13 %
Slide 12: Consistent Performance in Underlying Business CC Growth
2024 | Q2 Earnings Consistent Performance in Underlying Business CC1 Growth Across First and Second Quarter First Quarter Revenue Second Quarter Revenue $ millions $ millions 3% to 5% 7% to 9% CC Growth 1 CC Decline1 Flat 9% to 10% ~$90- (4)% CC Growth1 13% ~$40-$60 $110 CC Decline1 3% to 4% CC Grow
Slide 13: Revenue by Geography and Species
2024 | Q2 Earnings Second Quarter 2024 Revenue by Geography and Species Estimated ERP 2024 2023 Change CC Change1 Blackout Impact US Pet Health $338 $334 $4 1% ~10% Int’l Pet Health $241 $184 $57 34 % ~21% Total Pet Health $579 $518 $61 13 % 13% to 14% US Farm Animal $206 $162 $44 27 % ~3% Int’l Far
Slide 14: Adjusted Income Statement Highlights
2024 | Q2 Earnings Second Quarter 2024 Adjusted1 Income Statement Highlights Estimated ERP $ millions, except per share values 2024 2023 Change ($) Change (%) Blackout Impact Revenue $1,184 $1,057 $127 12 % 9% to 10% Cost of Sales $495 $434 $61 14 % Adjusted Gross Profit $689 $623 $66 11 % 12% to 14
Slide 15: Adjusted EBITDA and Adjusted EPS Impacted by Prior Year ERP Blackout
2024 | Q2 Earnings Q2 2023 to Q2 2024 Bridge Adjusted EBITDA and Adjusted EPS Impacted by Prior Year ERP Blackout, Manufacturing Slowdown Offsets Sales Growth Q2 2024 Adjusted EBITDA Q2 2024 Adjusted EPS ~$(27) ~$(0.01) vs. Prior Year vs. Prior Year Excluding Estimated Excluding Estimated ~$70 – ERP
Slide 16: Key Balance Sheet and Cash Flow Metrics
2024 | Q2 Earnings Key Balance Sheet and Cash Flow Metrics Debt Balances as of June 30, 2024 Operating Cash Flow (OCF) of $200M in Q2 2024; $ millions Year over year increase driven by improved working $5,719 $416 capital, specifically inventory, and lower project expenses. $5,303 Net leverage ratio
Slide 17: Financial Guidance
Financial Guidance Third Quarter and Full Year 2024
Slide 18: Financial Guidance
2024 | Q2 Earnings 2024 Full Year Financial May August Comments Raised organic2 CC3 growth Guidance Revenue $4,460 - $4,515 $4,410 - $4,460 expectations to 3% to 4% Reported Net Income (Loss) $(45) - $(3) $314 - $352 Including gain on aqua divestiture Organic2 guidance maintained Adjusted EBITDA1 $9
Slide 19: Innovation and Base Business Drive Improvement in Organic Growth Expectations
2024 | Q2 Earnings May Guidance to August Guidance Innovation and Base Business Drive Improvement in Organic Growth Expectations Revenue +$55 +2% to 3% vs. Prior Guidance CC1 Growth $(107) Excluding Aqua Divesture $4,460 - $4,515 +3% to 4% $10 - $30 Organic2 CC1 Growth $25 - $40 $4,410 - $4,460 Aqua
Slide 20: Adjusted EBITDA Guidance Maintained ex-Aqua, Adjusted EPS Maintained
2024 | Q2 Earnings May Guidance to August Guidance Adjusted EBITDA Guidance Maintained ex-Aqua, Adjusted EPS Guidance Maintained with Lower Interest & Tax Offsetting Aqua 2024 Adjusted EBITDA 2024 Adjusted EPS ~$(0.08) ~Flat ~$(0.08) from $(60) vs. Prior Guidance aqua divestiture ~$0.02 Excluding Aq
Slide 21: Financial Guidance Third Quarter 2024
2024 | Q2 Earnings Third Quarter 2024 Financial Total Revenue $1,020 - $1,050 Guidance Reported Net Income $368 - $396 Adjusted EBITDA1 $140 - $170 $ millions, except per share values Reported Diluted EPS $0.74 - $0.80 Adjusted Diluted EPS1 $0.09 - $0.14 Reported Net Income Margin Expectations Addit
Slide 22: Third Quarter Guidance Reflects Business Excluding Aqua
2024 | Q2 Earnings Q3 2023 to Q3 2024 Third Quarter Guidance Reflects Business Excluding Aqua Q3 2024 Adjusted EBITDA Q3 2024 Adjusted EPS $(24) ~$(0.04) $214 $(20) - $(50) $0.18 $(0.09)- $(0.04) ~$0.04 ~$(0.01) $140- $170 $0.09- $0.14 Aqua Divesture Gross Profit & Aqua EBITDA flow Interest Tax Q3 2
Slide 23: Improved Gross Profit and Lapping '23 Hyperinflation Headwind
2024 | Q2 Earnings Q4 2023 Actual to Q4 2024 Implied Guidance Implied Fourth Quarter Adj. EBITDA and Adj. EPS Growth Driven by Improved Gross Profit and Lapping ‘23 Hyperinflation Headwind Q4 2024 Adjusted EBITDA Q4 2024 Adjusted EPS $(23) ~$(0.03) $165 $0.08 Aqua Divesture Gross Profit & Argentina
Slide 24: Appendix
Appendix Reference slides and GAAP reported to non-GAAP adjusted reconciliations
Slide 25: Impact of Price, Rate, and Volume on Revenue – First Half 2024
2024 | Q2 Earnings First Half 2024 Impact of Price, Rate, and Volume on Revenue Revenue Price FX Rate Volume Total CC Change1 Pet Health $1,218 3% 0% (1)% 2% 2% Cattle $501 0% 9% 9% Poultry $395 (2)% 9% 11 % Swine $174 (1)% (9)% (8)% Aqua $80 (2)% (11)% (9)% Farm Animal $1,150 2% (1)% 3% 5% 5% Contr
Slide 26: Revenue by Geography and Species – First Half 2024
2024 | Q2 Earnings First Half 2024 Revenue by Geography and Species 2024 2023 Change CC Change1 US Pet Health $671 $694 $(23) (3)% Int’l Pet Health $547 $499 $48 11 % Total Pet Health $1,218 $1,193 $25 2% US Farm Animal $402 $344 $58 17 % Int’l Farm Animal $748 $755 $(7) —% Total Farm Animal $1,150
Slide 27: Adjusted Income Statement Highlights – First Half 2024
2024 | Q2 Earnings First Half 2024 Adjusted1 Income Statement Highlights $ millions, except per share values 2024 2023 Change ($) Change (%) Revenue $2,389 $2,314 $75 3% Cost of Sales $1,010 $927 $83 9% Adjusted Gross Profit $1,379 $1,387 $(8) (1)% Adjusted Gross Margin 57.7 % 59.9 % NM (220) bps Op
Slide 28: Sale of Aqua Business Enables Significant Debt Paydown
2024 | Q2 Earnings Sale of Aqua Business Enables Significant Debt Paydown Debt Maturities & Mandatory Payments1 Key Debt Information as of August 8, 20241 $ millions Total Gross Debt: $4.5 billion $3,000 • Term Loans: $3.5 billion; bears interest of 1-Month Term SOFR+185 bps • Senior Notes: $750 mil
Slide 29: Factors Impacting Cash Flow and Leverage
2024 | Q2 Earnings Factors Impacting Cash Flow and Leverage $ millions 2024 2021 2022 2023 Projected Comments Lower project spend partially Project1/Restructuring Cash $325 $194 $149 $40 - $50 offset by Q1 2024 restructuring Lower cash interest Cash Interest $221 $266 $379 Approx. $305 driven by deb
Slide 30: Innovation Step Up Drives Organic Growth Expectations
2024 | Q2 Earnings 2023 to 2024 Full Year Revenue Bridge Innovation Step Up Drives Organic Growth Expectations +3% to 4% Growth (1)% Decline +3% to 4% (2)% Decline Organic CC1 Growth ~$Flat $4,410 – $4,417 $(35) $4,460 $(97) $125 - $175 FX Aqua Innovation Base Business 2023 Revenue 2023 Divesture Gr
Slide 31: Financial Guidance Full Year 2024
2024 | Q2 Earnings Full Year 2024 May August Financial Total Revenue $4,460 – $4,515 $4,410 – $4,460 Guidance Adjusted Gross Margin1 55.6% – 56.1% 55.1% – 55.6% & Additional Operating Expenses $1,650 – $1,670 $1,645 – $1,660 Assumptions Adjusted EBITDA1 $960 – $1,000 $900 – $940 Adjusted EBITDA Marg
Slide 32: Adjusted EBITDA Reconciliation – Second Quarter 2024
2024 | Q2 Earnings Second Quarter 2024 Adjusted EBITDA 2024 2023 Reconciliation Reported Net Loss $(50) $(97) Net Interest Expense $65 $74 $ millions Income Tax Expense $18 $18 Depreciation and Amortization $164 $177 EBITDA $197 $171 Non-GAAP Adjustments Asset Impairment, Restructuring, and Other Sp
Slide 33: Reconciliation of GAAP Reported to Non-GAAP
2024 | Q2 Earnings Second Quarter 2024 Reconciliation 2024 2023 of GAAP GAAP Adjusted Non- GAAP Adjusted Non- Reported to Reported Items GAAP Reported Items GAAP Non-GAAP Amortization of Intangible Assets $131 $131 $– $136 $136 $– Adjusted Asset Impairment, Restructuring $80 $80 $– $35 $35 $– and Ot
Slide 34: Details of Adjustments to Certain GAAP Reported Measures
2024 | Q2 Earnings Second Quarter 2024 Details of For the three months ended June 30, 2024 and 2023: Adjustments to 1) Adjustments of $80 million for the three months ended June 30, 2024, principally included a $53 million impairment charge related to a pet health IPR&D asset (IL-4R) for which manag
Slide 35: Adjusted EBITDA Reconciliation – First Half 2024
2024 | Q2 Earnings First Half 2024 Adjusted 2024 2023 EBITDA Reconciliation Reported Net (Loss) Income $(18) $6 Net Interest Expense $131 $138 Income Tax Expense $(2) $23 $ millions Depreciation and Amortization $329 $350 EBITDA $440 $516 Non-GAAP Adjustments Cost of Sales $0 $1 Asset Impairment, Re
Slide 36: Reconciliation of GAAP Reported to Non-GAAP – First Half 2024
2024 | Q2 Earnings First Half 2024 Reconciliation 2024 2023 of GAAP GAAP Adjusted Non- GAAP Adjusted Non- Reported to Reported Items GAAP Reported Items GAAP Non-GAAP Cost of Sales1 $1,010 $0 $1,010 $928 $1 $927 Adjusted Amortization of Intangible Assets $264 $264 $– $270 $270 $– Income Asset Impair
Slide 37: Details of Adjustments to Certain GAAP Reported Measures
2024 | Q2 Earnings First Half 2024 Details of For the six months ended June 30, 2024 and 2023: Adjustments to 1) Adjustments of $1 million for the six months ended June 30, 2023, primarily related to amortization of inventory fair value adjustments recorded from the acquisition of certain assets of
Slide 38: EBITDA Guidance Reconciliation – Full Year 2024
2024 | Q2 Earnings Full Year 2024 EBITDA Reported Net Income $314 - $352 Guidance Net Interest Expense Approx. $245 Reconciliation Income Tax Provision $179 - $201 Depreciation and Amortization Approx. $655 $ millions EBITDA $1,390 - $1,449 Non-GAAP Adjustments Asset Impairment, Restructuring, and O
Slide 39: EPS Guidance Reconciliation – Full Year 2024
2024 | Q2 Earnings Full Year 2024 EPS Guidance Reconciliation Reported Earnings per Share $0.63 - $0.71 Amortization of Intangible Assets Approx. $1.05 Asset Impairment, Restructuring, and Other Special Charges1 $0.28 - $0.32 Gain on Divestiture Approx. $(1.31) Other Expenses, Net Approx. $0.03 Subt
Slide 40: EBITDA Guidance Reconciliation – Third Quarter 2024
2024 | Q2 Earnings Third Quarter 2024 EBITDA Reported Net Income $368 - $396 Guidance Reconciliation Net Interest Expense Approx. $60 Income Tax Provision $180 - $192 $ millions Depreciation and Amortization Approx. $165 EBITDA $772 - $812 Non-GAAP Adjustments Asset Impairment, Restructuring, and Ot
Slide 41: EPS Guidance Reconciliation – Third Quarter 2024
2024 | Q2 Earnings Third Quarter 2024 EPS Guidance Reconciliation Reported Earnings per Share $0.74 - $0.80 Amortization of Intangible Assets Approx. $0.26 Asset Impairment, Restructuring, and Other Special Charges1 $0.02 - $0.04 Gain on Divestiture Approx. $(1.31) Other Expense, Net Approx. $0.03 S