Elanco Animal Health Incorporated · NYSE:ELAN
Elanco Animal Health — Q3 2023 Earnings Presentation
37 slides from Elanco Animal Health's earnings presentation, Nov 7, 2023
Slide 1: 2023 Earnings – Third Quarter
2023 Earnings – Third Quarter November 7, 2023
Slide 2: Notices and Disclaimers
2023 | Q3 Earnings Notices and Disclaimers Forward-Looking Statements. This presentation includes forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include without limitation, statements concerning our 2023 full year and fourth quarter gui
Slide 3: On Today's Call
2023 | Q3 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: Return to Growth, Innovation On-Track
2023 | Q3 Earnings Return to Growth, Innovation On-Track Returned to Growth Third quarter of sequential improvement2 in revenue growth driven by both Pet Health and Farm Animal, leading to Adj EBITDA and Adj EPS growth Q3 2023 vs Innovation On-Track Prior Year Data submitted to FDA for Credelio Quat
Slide 5: Constant Currency Growth of 5%, Led by International Pet Health and Farm Animal
2023 | Q3 Earnings Q3 2022 to Q3 2023 Revenue Bridge Constant Currency1 Growth of 5%, Led by International Pet Health and Farm Animal $ in millions 5% CC1 5% Growth CC1 Growth 16% CC1 2% Growth Growth $1,068 Flat $1,026 Q3 2022 FX Rates U.S. Int’l US Int’l Q3 2023 Actual & CMO Pet Health Pet Health
Slide 6: Highlights Since Our Last Earnings Call
2023 | Q3 Earnings Innovation Credelio Quattro1, Innovation Sales CPMA (Parvo) Bovaer1, and on track for expanded Zenrelia1 submitted; $210-$250M manufacturing all 3 on path toward contribution in 2023, capacity on track H1’24 approval or 2ppt of growth for early 2024 IPP Po Innovation, it on Portfo
Slide 7: Progress and Outlook for Elanco's Next Era of Growth
2023 | Q3 Earnings Preparing for a historic innovation launch window in ‘23 and ‘24 Progress and Outlook for Elanco’s Next Era of Growth Regulatory Peak Sales Asset Agency Species Initial Submission1 Approval2 Launch1 Opportunity3 Commentary Experior FDA (Rx) First-in-class Ammonia Reduction Bexacat
Slide 8: A Livestock Carbon Inset Marketplace Creating Value for Farmers
2023 | Q3 Earnings A Livestock Carbon Government Elanco has developed UpLook™, an insights-based engine that analyzes on-farm data to measure an operation’s Incentives Inset Marketplace In the traditional value carbon footprint. $ $ Creating Value stream, livestock producers sell milk to processors,
Slide 9: Financial Results
Financial Results Third Quarter 2023
Slide 10: Impact of Price, Rate, and Volume on Revenue
2023 | Q3 Earnings Third Quarter 2023 Impact of Price, Rate, and Volume on Revenue Revenue Price FX Rate Volume Total CC Change1 Pet Health $495 4% 0% 2% 6% 6% Cattle $242 (1)% 7% 7% Poultry $184 (2)% 5% 7% Swine $93 0% (2)% (2)% Aqua $42 2% (11)% (13)% Farm Animal $561 3% (1)% 1% 3% 4% Contract Man
Slide 11: Revenue by Geography and Species
2023 | Q3 Earnings Third Quarter 2023 Revenue by Geography and Species 2023 2022 Change CC Change1 US Pet Health $301 $301 0% 0% Int’l Pet Health $194 $168 16% 16% Total Pet Health $495 $469 6% 6% US Farm Animal $174 $170 2% 2% Int’l Farm Animal $388 $374 4% 5% Total Farm Animal $561 $545 3% 4% Cont
Slide 12: Adjusted Income Statement Highlights
2023 | Q3 Earnings Third Quarter 2023 Adjusted1 Income Statement Highlights $ millions, except per share values 2023 2022 Change ($) Change (%) Revenue $1,068 $1,026 $42 4% Cost of Sales $486 $472 $14 3% Adjusted Gross Profit $582 $554 $28 5% Adjusted Gross Margin 54.5% 54.0% NM +50 bps Operating Ex
Slide 13: Adjusted EBITDA and Adjusted EPS Benefited from Sales Outperformance & Improved Tax and Interest
2023 | Q3 Earnings Third Quarter 2023 Adjusted EBITDA and Adjusted EPS Benefited from Sales Outperformance & Improved Tax and Interest Q3 Adjusted EBITDA Q3 Adjusted EPS $ millions ~$10 ~$(9) from timing +$29 vs. Midpoint +$0.08 ~$27 of Guidance vs. Midpoint ~$0.01 of Guidance $214 ~$0.05 ~$0.01 ~$0
Slide 14: Key Balance Sheet and Cash Flow Metrics
2023 | Q3 Earnings Key Balance Sheet and Cash Flow Metrics Debt Balances as of September 30, 2023 Operating Cash Flow (OCF) of $198M in Q3 2023; $ millions Year over year increase driven by improved inventory performance. $156M of Debt Paydown in Q3 2023; Adjusted net leverage ratio2 decreased to 5.
Slide 15: Financial Guidance
Financial Guidance Fourth Quarter and Full Year 2023
Slide 16: Financial Guidance: Full Year
2023 | Q3 Earnings 2023 Full Year Financial August November Comments Guidance Revenue $4,350 - $4,410 $4,360 - $4,400 Raised midpoint of expected CC2 growth by 50 basis points Includes Q3 non-cash goodwill Reported Net Loss $(170) - $(127) $(1,204) - $(1,174) impairment charge of $1,042 $ millions,
Slide 17: Adjusted EBITDA and Adjusted EPS Benefited from Sales Outperformance & Improved Tax and Interest
2023 | Q3 Earnings Full Year 2023 Adjusted EBITDA and Adjusted EPS Benefited from Sales Outperformance & Improved Tax and Interest 2023 Adjusted EBITDA 2023 Adjusted EPS $ millions ~$30 ~$(10) ~$(20) +$0.06 vs. Mid Point +$2.5 ~$0.02 of Guidance vs. Mid-Point ~$0.04 of Guidance $950 – $1,010 $0.80 –
Slide 18: Financial Guidance: Fourth Quarter 2023
2023 | Q3 Earnings Fourth Quarter 2023 Financial Total Revenue $978 - $1,018 Guidance Reported Net Loss $(113) - $(83) Adjusted EBITDA1 $151 - $186 $ millions, except per share values Reported Diluted EPS $(0.23) - $(0.17) Adjusted Diluted EPS1 $0.07 - $0.13 Impact of FX vs Prior Year Margin Expecta
Slide 19: Expect Second Half Return to Growth as Reflected in Full Year Revenue Guidance
2023 | Q3 Earnings 2022 and 2023 Revenue Growth Expect Second Half Return to Growth as Reflected in Full Year Revenue Guidance, Supported by Diverse Portfolio Drivers Revenue Year-over-year CC1 Change 2022: 3% Decline 2023: Flat to 1% Growth Drivers of Q4 2023 Growth: Innovation Ramp +2% to +4% Pric
Slide 20: Early Considerations for 2024, Expect Revenue Growth
2023 | Q3 Earnings 2024 Early Considerations for 2024, Expect Revenue Growth1 Tailwinds Headwinds Existing innovation ramp and new launches Competition in U.S. Pet Health vet clinic business Expanded physical availability in Pet Retail Farm Animal generics and U.S. cattle numbers Enhanced share of v
Slide 21: Appendix
Appendix Reference slides and GAAP reported to non-GAAP adjusted reconciliations
Slide 22: Impact of Price, Rate, and Volume on Revenue
2023 | Q3 Earnings Nine Months 2023 Impact of Price, Rate, and Volume on Revenue Revenue Price FX Rate Volume Total CC Change1 Pet Health $1,688 5% (2)% (5)% (2)% 0% Cattle $700 (2)% (3)% (1)% Poultry $545 (3)% 3% 6% Swine $284 (2)% 0% 2% Aqua $132 1% 0% (1)% Farm Animal $1,661 4% (2)% (2)% 0% 2% Co
Slide 23: Revenue by Geography and Species
2023 | Q3 Earnings Nine Months 2023 Revenue by Geography and Species 2023 2022 Change CC Change1 US Pet Health $995 $989 1% 1% Int’l Pet Health $693 $729 (5)% (2)% Total Pet Health $1,688 $1,718 (2)% 0% US Farm Animal $518 $533 (3)% (3)% Int’l Farm Animal $1,144 $1,133 1% 4% Total Farm Animal $1,661
Slide 24: Adjusted Income Statement Highlights
2023 | Q3 Earnings Nine Months 2023 Adjusted1 Income Statement Highlights $ millions, except per share values 2023 2022 Change ($) Change (%) Revenue $3,382 $3,426 $(44) (1)% Cost of Sales $1,413 $1,465 $(52) (4)% Adjusted Gross Profit $1,969 $1,961 $8 0% Adjusted Gross Margin 58.2% 57.2% NM +100 bp
Slide 25: Confident in Liquidity and Ability to Manage Debt Obligations
2023 | Q3 Earnings Confident in Liquidity and Ability to Manage Debt Obligations Debt Maturities & Mandatory Payments Key Debt Information1 $ millions Total Gross Debt: $6.0 billion $3,000 • Term Loans: $4.8 billion; bears interest of 1-Month Term SOFR+185 bps • Senior Notes: $750 million; bears int
Slide 26: Meaningful Reduction in Project Cash Expected to Begin in 2024
2023 | Q3 Earnings 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 & beyond $965 – $210 Adj. EBITDA2 $1,059 $1,017 $194 $1,000 $140-$160 $140 – $126 Project Cash Costs $32
Slide 27: Financial Guidance: Full Year 2023
2023 | Q3 Earnings Full Year 2023 August November Financial Total Revenue $4,350 – $4,410 $4,360 – $4,400 Guidance Adjusted Gross Margin1 56.4% – 56.9% 56.6% – 57.1% & Additional Operating Expenses $1,610 – $1,615 $1,615 – $1,620 Assumptions Adjusted EBITDA1 $950 – $1,010 $965 – $1,000 Adjusted EBIT
Slide 28: Adjusted EBITDA Reconciliation
2023 | Q3 Earnings Third Quarter 2023 Adjusted 2023 2022 EBITDA Reconciliation Reported Net Loss $(1,096) $(65) Net Interest Expense $72 $60 Income Tax Expense $(1) $21 $ millions Depreciation and Amortization $173 $166 EBITDA $(852) $182 Non-GAAP Adjustments Cost of Sales $1 $0 Asset Impairment, Re
Slide 29: Reconciliation of GAAP Reported to Non-GAAP
2023 | Q3 Earnings Third Quarter 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 $487 $1 $486 $472 $0 $472 Adjusted Amortization of Intangible Assets $140 $140 $0 $128 $128 $0 Income Asset Impairm
Slide 30: Details of Adjustments to Certain GAAP Reported Measures
2023 | Q3 Earnings Third Quarter 2023 Details of For the three months ended September 30, 2023 and 2022: Adjustments to 1) Adjustments of $1 million for the three months ended September 30, 2023, related to amortization of an inventory fair value adjustment recorded from the acquisition of certain a
Slide 31: Adjusted EBITDA Reconciliation
2023 | Q3 Earnings Nine Months 2023 Adjusted 2023 2022 EBITDA Reconciliation Reported Net Loss $(1,090) $(24) Net Interest Expense $210 $179 Income Tax Expense $22 $41 $ millions Depreciation and Amortization $523 $513 EBITDA $(335) $709 Non-GAAP Adjustments Cost of Sales $2 $0 Asset Impairment, Res
Slide 32: Reconciliation of GAAP Reported to Non-GAAP
2023 | Q3 Earnings Nine Months 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 $1,415 $2 $1,413 $1,465 $0 $1,465 Adjusted Amortization of Intangible Assets $410 $410 $0 $398 $398 $0 Income Asset I
Slide 33: Details of Adjustments to Certain GAAP Reported Measures
2023 | Q3 Earnings Nine Months 2023 Details of For the nine months ended September 30, 2023 and 2022: 1) Adjustments of $2 million for the nine months ended September 30, 2023, primarily related to amortization of inventory fair value adjustments recorded from the Adjustments to acquisition of certa
Slide 34: EBITDA Guidance Reconciliation
2023 | Q3 Earnings Full Year 2023 EBITDA Reported Net Loss $(1,204) - $(1,174) Guidance Net Interest Expense Approx. $280 Reconciliation Income Tax Provision $27 - $44 Depreciation and Amortization Approx. $695 $ millions EBITDA $(199) - $(154) Non-GAAP Adjustments Cost of Sales Approx. $2 Asset Imp
Slide 35: EPS Guidance Reconciliation
2023 | Q3 Earnings Full Year 2023 EPS Guidance Reconciliation Reported Loss per Share $(2.43) - $(2.37) Amortization of Intangible Assets Approx. $1.11 Asset Impairment, Restructuring, and Other Special Charges1 $0.19 - $0.21 Goodwill Impairment2 $2.11 Other Expenses, Net Approx. $0.06 Subtotal $3.4
Slide 36: EBITDA Guidance Reconciliation
2023 | Q3 Earnings Fourth Quarter 2023 EBITDA Reported Net Loss $(113) - $(83) Guidance Net Interest Expense Approx. $70 Reconciliation Income Tax Provision $5 - $22 Depreciation and Amortization Approx. $170 $ millions EBITDA $(134) - $(180) Non-GAAP Adjustments Asset Impairment, Restructuring, and
Slide 37: EPS Guidance Reconciliation
2023 | Q3 Earnings Fourth Quarter 2023 EPS Guidance Reconciliation Reported Loss per Share $(0.23) - $(0.17) Amortization of Intangible Assets Approx. $0.28 Asset Impairment, Restructuring, and Other Special Charges1 $0.01 - $0.03 Goodwill Impairment2 $0.00 Other Expenses, Net Approx. $0.01 Subtotal