Elanco Animal Health Incorporated · NYSE:ELAN
Elanco Animal Health — Q2 2023 Earnings Presentation
35 slides from Elanco Animal Health's earnings presentation, Aug 7, 2023
Slide 1: 2023 Earnings – Second Quarter
2023 Earnings – Second Quarter August 7, 2023
Slide 2: Notices and Disclaimers
2023 | Q2 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 third quarter guid
Slide 3: On Today's Call
2023 | 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: Stabilization Drives Inflection, Focus on Return to Growth
2023 | Q2 Earnings Stabilization Drives Inflection, Focus Sequential Improvement on Return to Growth Second quarter of sequential improvement3 in revenue growth driven by strong performance in U.S. Pet Health, International Farm Animal and Innovation Milestones Achieved Seresto resolution, ERP integ
Slide 5: Sequential Improvement in Base Business Despite Pockets of Near-Term Headwinds
2023 | Q2 Earnings H1 2022 to H1 2023 Revenue Bridge Sequential Improvement in Base Business Despite Pockets of Near-Term Headwinds $ in millions 2% Decline $2,401 7% Decline 1% Growth 6 ppts from Spain 5% Decline 4% Growth (1)% 4 ppts from Vaccine Supply CC Decline1 $2,314 H1 2022 FX Rates U.S. Int
Slide 6: Innovation, Productivity and Portfolio Highlights
2023 | Q2 Earnings Innovation JAK Inhibitor Credelio Quattro™1 Approval Shift for canine & Bovaer expect all for IL-31 SA mAB for dermatology, all data for approval to canine dermatology data for approval be with FDA by end now expected in with FDA of August 2025 IPP Portfolio Po Innovation, it on S
Slide 7: Progress and Outlook for Elanco's Next Era of Growth
2023 | Q2 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: Financial Results
Financial Results Second Quarter 2023
Slide 9: Impact of Price, Rate, and Volume on Revenue
2023 | Q2 Earnings Second Quarter 2023 Impact of Price, Rate, and Volume on Revenue1 Revenue Price FX Rate Volume Total CC Change2 Pet Health $518 4% (1)% (19)% (15)% (14)% Cattle $210 (2)% (15)% (13)% Poultry $178 (3)% 2% 5% Swine $89 (1)% 0% 1% Aqua $50 2% 19% 17% Farm Animal $527 3% (2)% (6)% (5)
Slide 10: Sequential Improvement in Base Business with Anticipated Unwind of ERP Blackout
2023 | Q2 Earnings Sequential Improvement in Base Business with Anticipated Unwind of ERP Blackout Impacting Q2 Reported Revenue First Quarter Revenue Second Quarter Revenue $ millions $ millions 7% to 9% 3% Growth 6% Decline CC Change1 1% to 3% 1% Decline $1,257 Decline 0% to 1% 8% to 9% ~$90- Decl
Slide 11: Revenue by Geography and Species
2023 | Q2 Earnings Second Quarter 2023 Revenue by Geography and Species Estimated ERP 2023 2022 Change CC Change1 Blackout Impact US Pet Health $334 $366 (9)% (9)% ~(11)% Int’l Pet Health $184 $243 (24)% (23)% ~(14)% Total Pet Health $518 $610 (15)% (14)% (11)% to (13)% US Farm Animal $162 $170 (5)%
Slide 12: Adjusted Income Statement Highlights
2023 | Q2 Earnings Second Quarter 2023 Adjusted1 Income Statement Highlights Estimated ERP $ millions, except per share values 2023 2022 Change ($) Change (%) Blackout Benefit Revenue $1,057 $1,175 $(118) (10)% $(90) to $(110) Cost of Sales $434 $484 $(50) (10)% Adjusted Gross Profit $623 $691 $(68)
Slide 13: Adjusted EBITDA and Adjusted EPS Benefitted from Gross Profit Performance
2023 | Q2 Earnings Second Quarter 2023 Adjusted EBITDA and Adjusted EPS Benefitted from Gross Profit Performance & Improved Tax and Interest Q2 Adjusted EBITDA Q2 Adjusted EPS $ millions +$61 +$0.13 $0.39 ~$(0.13) vs. High End vs. High End ~$10 of Guidance ~$0.02 of Guidance ~$10 $222 ~$0.01 ~$0.09
Slide 14: Key Balance Sheet and Cash Flow Metrics
2023 | Q2 Earnings Key Balance Sheet and Cash Flow Metrics Debt Balances as of June 30, 2023 Operating Cash Flow (OCF) of $61M in Q2 2023; $ millions Year over year decline driven by 2022 interest rate swap settlements, higher cash interest expense and higher inventory levels. Net leverage ratio2 in
Slide 15: Financial Guidance
Financial Guidance Third Quarter and Full Year 2023
Slide 16: Financial Guidance
2023 | Q2 Earnings 2023 Full Year Financial May August Comments Guidance Revenue $4,310 - $4,400 $4,350 - $4,410 Raised midpoint by $25M Reported Net Income $(134) - $(98) $(170) - $(127) $ millions, except Adjusted EBITDA1 $940 - $1,000 $950 - $1,010 Raised midpoint by $10M per share values Reporte
Slide 17: Financial Guidance Third Quarter 2023
2023 | Q2 Earnings Third Quarter 2023 Financial Total Revenue $1,025 - $1,060 Guidance Reported Net Income $(92) - $(69) Adjusted EBITDA1 $170 - $200 $ millions, except per share values Reported Diluted EPS $(0.18) - $(0.14) Adjusted Diluted EPS1 $0.08 - $0.13 Impact of FX Margin Expectations Additi
Slide 18: Expect Second Half Return to Growth Reflected in Full Year Revenue Guidance
2023 | Q2 Earnings 2022 and 2023 Revenue Growth by Half 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: 1% Decline to 1% Growth Drivers of H2’23 Improvement: Innovation Ram
Slide 19: Appendix
Appendix Reference slides and GAAP reported to non-GAAP adjusted reconciliations
Slide 20: Impact of Price, Rate, and Volume on Revenue
2023 | Q2 Earnings First Half 2023 Impact of Price, Rate, and Volume on Revenue Revenue Price FX Rate Volume Total CC Change1 Pet Health $1,193 5% (2)% (7)% (5)% (3)% Cattle $458 (3)% (7)% (5)% Poultry $361 (4)% 2% 6% Swine $191 (4)% 1% 5% Aqua $90 0% 6% 6% Farm Animal $1,100 4% (3)% (3)% (2)% 1% Co
Slide 21: Revenue by Geography and Species
2023 | Q2 Earnings First Half 2023 Revenue by Geography and Species 2023 2022 Change CC Change1 US Pet Health $694 $688 1% 1% Int’l Pet Health $499 $561 (11)% (7)% Total Pet Health $1,193 $1,250 (5)% (3)% US Farm Animal $344 $363 (5)% (5)% Int’l Farm Animal $755 $758 (0)% 4% Total Farm Animal $1,100
Slide 22: Adjusted Income Statement Highlights
2023 | Q2 Earnings First Half 2023 Adjusted(1) Income Statement Highlights $ millions, except per share values 2023 2022 Change ($) Change (%) Revenue $2,314 $2,401 $(87) (4)% Cost of Sales $927 $993 $(66) (7)% Adjusted Gross Profit $1,387 $1,408 $(21) (1)% Adjusted Gross Margin 59.9% 58.6% NM +130
Slide 23: Confident in Liquidity and Ability to Manage Debt Obligations
2023 | Q2 Earnings Confident in Liquidity and Ability to Manage Debt Obligations Debt Maturities & Mandatory Payments1 Key Debt Information1 $ millions Total Gross Debt: $6.1 billion $3,000 • Term Loans: $4.8 billion; bears interest of 1-Month Term SOFR+185 bps • Senior Notes: $750 billion; bears in
Slide 24: Meaningful Reduction in Project Cash Expected to Begin in 2024
2023 | Q2 Earnings Meaningful Reduction in Project Cash Expected to Begin in 2024 Estimated Project Cash Costs Factors Impacting Operating Cash Flow $ millions $ millions $325 2024 2021 2022 2023 & beyond $210 $950 – $194 Adj. EBITDA $1,059 $1,017 $1,010 $140-$160 $126 $140 – Project Cash Costs $325
Slide 25: Financial Guidance Full Year 2023
2023 | Q2 Earnings Full Year 2023 May August Financial Total Revenue $4,310 – $4,400 $4,350 – $4,410 Guidance Adjusted Gross Margin1 56.3% – 56.9% 56.4% – 56.9% & Additional Operating Expenses $1,595 – $1,605 $1,610 – $1,615 Assumptions Adjusted EBITDA1 $940 – $1,000 $950 – $1,010 Adjusted EBITDA Ma
Slide 26: Adjusted EBITDA Reconciliation
2023 | Q2 Earnings Second Quarter 2023 Adjusted 2023 2022 EBITDA Reconciliation Reported Net Loss $(97) $(10) Net Interest Expense $74 $67 Income Tax Expense $18 $(4) $ millions Depreciation and Amortization $177 $171 EBITDA $171 $224 Non-GAAP Adjustments Cost of Sales $– $– Asset Impairment, Restru
Slide 27: Reconciliation of GAAP Reported to Non-GAAP Adjusted Income Statement Items
2023 | Q2 Earnings Second Quarter 2023 Reconciliation 2023 2022 of GAAP GAAP Adjusted Non- GAAP Adjusted Non- Reported to Reported Items GAAP Reported Items GAAP Non-GAAP Amortization of Intangible Assets $136 $136 $– $133 $133 $– Adjusted Asset Impairment, Restructuring $35 $35 $– $86 $86 $– and Ot
Slide 28: Details of Adjustments to Certain GAAP Reported Measures
2023 | Q2 Earnings Second Quarter 2023 Details of For the three months ended June 30, 2023 and 2022: Adjustments to 1) Adjustments of $35 million for the three months ended June 30, 2023 related to charges associated with integration efforts and external costs related to the acquisition of Bayer Ani
Slide 29: Adjusted EBITDA Reconciliation First Half 2023
2023 | Q2 Earnings First Half 2023 Adjusted 2023 2022 EBITDA Reconciliation Reported Net Loss $6 $41 Net Interest Expense $138 $119 Income Tax Expense $23 $20 $ millions Depreciation and Amortization $350 $347 EBITDA $516 $527 Non-GAAP Adjustments Cost of Sales $1 $– Asset Impairment, Restructuring,
Slide 30: Reconciliation of GAAP Reported to Non-GAAP Adjusted Income Statement Items
2023 | Q2 Earnings First Half 2023 Reconciliation 2023 2022 of GAAP GAAP Adjusted Non- GAAP Adjusted Non- Reported to Reported Items GAAP Reported Items GAAP Non-GAAP Cost of Sales1 $928 $1 $927 $993 $– $993 Adjusted Amortization of Intangible Assets $270 $270 $– $270 $270 $– Income Asset Impairment
Slide 31: Details of Adjustments to Certain GAAP Reported Measures
2023 | Q2 Earnings First Half 2023 Details of For the six months ended June 30, 2023 and 2022: 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 N
Slide 32: EBITDA Guidance Reconciliation Full Year 2023
2023 | Q2 Earnings Full Year 2023 EBITDA Reported Net Loss $(170) - $(127) Guidance Net Interest Expense Approx. $305 Reconciliation Income Tax Provision $6 - $44 Depreciation and Amortization Approx. $690 $ millions EBITDA $830 - $911 Non-GAAP Adjustments Cost of Sales Approx. $1 Asset Impairment,
Slide 33: EPS Guidance Reconciliation Full Year 2023
2023 | Q2 Earnings Full Year 2023 EPS Guidance Reconciliation Reported Loss per Share $(0.34) - $(0.26) Amortization of Intangible Assets Approx. $1.09 Asset Impairment, Restructuring, and Other Special Charges1 $0.18 - $0.22 Other Expenses, Net Approx. $0.04 Subtotal $1.32 - $1.36 Tax Impact of Adj
Slide 34: EBITDA Guidance Reconciliation Third Quarter 2023
2023 | Q2 Earnings Third Quarter 2023 EBITDA Reported Net Loss $(92) - $(69) Guidance Reconciliation Net Interest Expense Approx. $80 Income Tax Provision $(12) - $6 $ millions Depreciation and Amortization Approx. $170 EBITDA $148 - $188 Non-GAAP Adjustments Asset Impairment, Restructuring, and Oth
Slide 35: EPS Guidance Reconciliation Third Quarter 2023
2023 | Q2 Earnings Third Quarter 2023 EPS Guidance Reconciliation Reported Loss per Share $(0.18) - $(0.14) Amortization of Intangible Assets Approx. $0.27 Asset Impairment, Restructuring, and Other Special Charges1 $0.02 - $0.04 Subtotal $0.30 - $0.32 Tax Impact of Adjustments $(0.05) - $(0.03) Tot