Elanco Animal Health Incorporated · NYSE:ELAN
Elanco Animal Health — Q4 2022 Earnings Presentation
39 slides from Elanco Animal Health's earnings presentation, Mar 1, 2023
Slide 1: 2022 Earnings – Fourth Quarter
2022 Earnings – Fourth Quarter As Revised March 1, 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 and first half guidance, our long-term revenue and earnings growth expectations, expectations regarding reduction of debt
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 Acceleration
Elanco Looks Innovation on track Toward Stabilization Path toward now 6 potential blockbusters approved by and Acceleration H1’24, with addition of Bovaer 2023 Reducing operational complexity Challenging financials Final Bayer systems integration in Q2’23 Significant integration cash needs conclude
Slide 5: Full Year 2022 | Key Financial Metrics
Data on this slide reflects revisions to previously reported financial results related to the Form 8-K/A filed March 1, 2023 Full Year 2022 | Key Financial Metrics $ Millions Except Per Share Data Revenue Adj. EBITDA(2) Adj. EPS (2) Change in CC(1) Change in reported dollars Change in reported dolla
Slide 6: IPP: Innovation, Portfolio, Productivity
Data on this slide reflects revisions to previously reported financial results related to the Form 8-K/A filed March 1, 2023 IPP: Innovation, Portfolio, Productivity 2022 Highlights Portfolio Full year price +2%; Pet and Farm +2% each Pet Health: U.S. para retail OTC leader (1), Pain portfolio grew
Slide 7: Macro Pressures Remain, Elanco Tailwinds Strengthen in 2023
Data on this slide reflects revisions to previously reported financial results related to the Form 8-K/A filed March 1, 2023 Macro Pressures Remain, Environmental Factors Elanco Factors Elanco Tailwinds Strengthen in 2023 China Covid lockdowns Price 2021 to 2023 Revenue Bridge Supply Chain disruptio
Slide 8: Progress and Outlook for Elanco's Next Era of Growth
Progress and Outlook for Elanco’s Next Era of Growth Preparing for a historic innovation launch window in ‘23 and ‘24 US Regulatory Exploratory Product Initial Peak Sales Asset Agency Species Development Development Submission(1) Approval(2) Launch(1) Opportunity(3) Bexacat FDA (Rx) Q4 2022 Q2 2023
Slide 9: Financial Results
Financial Results Fourth Quarter and Full Year 2022
Slide 10: Adjusted Income Statement Highlights – Fourth Quarter 2022
Data on this slide reflects revisions to previously reported financial results related Fourth Quarter 2022 to the Form 8-K/A filed March 1, 2023 Adjusted(1) Income Statement Highlights $ millions, except per share values 2022 2021 Change ($) Change (%) Revenue $985 $1,112 $(127) (11)% Cost of Sales
Slide 11: Impact of Price, Rate, and Volume on Revenue
Data on this slide reflects revisions to previously reported financial results related to the Form 8-K/A filed March 1, 2023 Fourth Quarter 2022 Impact of Price, Rate, and Volume on Revenue Revenue Price FX Rate Volume Total CC Change(1) Pet Health $420 2% (4%) (13%) (15%) (11%) Cattle $222 (4%) (9%
Slide 12: Revenue and Constant Currency Change by Region
Data on this slide reflects revisions to previously reported financial results related to the Form 8-K/A filed March 1, 2023 Fourth Quarter 2022 Revenue and Constant Currency Change by Region U.S. International Total $ in millions Revenue Change Revenue CC Change(1) Revenue CC Change(1) Pet Health $
Slide 13: Adjusted Income Statement Highlights – Full Year 2022
Data on this slide reflects revisions to previously reported financial results related Full Year 2022 to the Form 8-K/A filed March 1, 2023 Adjusted(1) Income Statement Highlights $ millions, except per share values 2022 2021 Change ($) Change (%) Revenue $4,411 $4,764 $(353) (7)% Cost of Sales $1,9
Slide 14: Value Capture Ahead of Schedule and Expected to Increase
Value Capture Ahead of Schedule and Expected to Increase Adj. EBITDA Synergy Expectations(1) Cumulative ($ millions) >$400 ~$380 $363 ~$35 2022 synergies ~$140 million ~$75 ~$45 incremental; exceeded initial $300 expectations by ~$75 million $226 ~$80 ~$60 2023 expected cumulative $190-$230 synergie
Slide 15: Key Balance Sheet and Cash Flow Metrics
Data on this slide reflects revisions to previously reported financial results related to the Form 8-K/A filed March 1, 2023 and has been updated to reflect final Key Balance Sheet and Cash Flow Metrics cash flow figures as reported in the 10-K. Debt Balances as of December 31, 2022 $ millions Opera
Slide 16: Financial Guidance
Financial Guidance First Half and Full Year 2023
Slide 17: Financial Guidance – 2023 Full Year
2023 Full Year Financial 2023 Comments Guidance Revenue $4,280 - $4,400 Expect flat to 3% decline in constant currency $ millions, except per share values Reported Net Loss $(157) - $(109) Adjusted EBITDA(1) $920 - $1,000 Price growth partially offsets lower volume, inflation, and strategic investme
Slide 18: Expected 2023 Revenue Drivers by Category
Expected 2023 Revenue Drivers by Category Tailwinds Headwinds Foreign exchanges rates: Portfolio Price growth greater than +2% across portfolio H1 headwind, H2 tailwind Innovation growth led by Competitive pressure in pockets of U.S. veterinary market (para, pain, otitis) Parvovirus Other OTC Econom
Slide 19: 2023 Adjusted EBITDA Reflects Topline & Investment Expectations
Data on this slide reflects revisions to previously reported financial results related to the Form 8-K/A filed March 1, 2023 2023 Adjusted EBITDA Reflects Topline & Investment Expectations Full Year 2022 to 2023 Bridge $ millions $1,017 ~(5)% ~$(5) ~Flat to $(100) vs. 2022 at midpoint in CC $(10) -
Slide 20: 2023 Adjusted EPS Impacted by Rising Interest Rates & Tax Compare
Data on this slide reflects revisions to previously reported financial results related to the Form 8-K/A filed March 1, 2023 2023 Adjusted EPS Impacted by Rising Interest Rates & Tax Compare Full Year 2022 to 2023 Bridge ~$(0.02) $(0.15)-$(0.03) $1.11 ~$(0.15) ~$(0.31) vs. 2022 at Midpoint in CC $(0
Slide 21: Financial Guidance – First Half 2023
First Half 2023 Financial Total Revenue $2,230 – $2,310 Guidance Reported Net Income $(53) – $(22) $ millions, except per share values Adjusted EBITDA(1) $490 – $540 Reported Diluted EPS $(0.11) – $(0.04) Adjusted Diluted EPS(1) $0.43 – $0.50 Impact of FX H1 Cadence Additional Assumptions expected t
Slide 22: Meaningful Reduction in Project Cash Begins in 2024
Adj. EBTIDA reflects revisions related to the Form 8-K/A filed March 1, 2023. The Change in Net Working Capital (NWC) line has been updated to reflect NWC as a use of cash in line with the other cash costs in the chart. The figures Meaningful Reduction in Project Cash Begins in 2024 have been update
Slide 23: Appendix
Appendix Reference slides and GAAP reported to non-GAAP adjusted reconciliations
Slide 24: Impact of Price, Rate, and Volume on Revenue – Full Year 2022
Data on this slide reflects revisions to previously reported financial results related to the Form 8-K/A filed March 1, 2023 Full Year 2022 Impact of Price, Rate, and Volume on Revenue Revenue Price FX Rate Volume Total CC Change(1) Pet Health $2,138 2% (4%) (7%) (9%) (5%) Cattle $944 (4%) (4%) 0% P
Slide 25: Revenue and Constant Currency Change by Region – Full Year 2022
Data on this slide reflects revisions to previously reported financial results related to the Form 8-K/A filed March 1, 2023 Full Year 2022 Revenue and Constant Currency Change by Region U.S. International Total $ in millions Revenue Change Revenue CC Change(1) Revenue CC Change(1) Pet Health $1,250
Slide 26: 2022 Results in Investor Day Framework
2022 Results in Investor Day Framework Innovation(1) Focus Core Defend Overall 3% 37% 42% 18% % of Total 1.5% 1.5% 1.5% 5.0% 0.5% 1.0% 1.0% (3.0)% (3.0)% (1.5)% + Others + Others 2021 Revenue CC Growth(3) 2022 Revenue CC Growth CC = Constant Currency, representing the growth rate excluding the impac
Slide 27: Revenue Performance by Top Countries
Data on this slide reflects revisions to previously reported financial results related Full Year 2022 to the Form 8-K/A filed March 1, 2023 Revenue Total % of Total CC Change(1) Performance by United States $1,948 44% (7)% Top Countries China $223 5% (14)% Brazil $161 4% 6% United Kingdom $138 3% (1
Slide 28: Revenue Performance for Select Products
Data on this slide reflects revisions to previously reported financial results related Full Year 2022 to the Form 8-K/A filed March 1, 2023 Revenue 2022 Revenue % of Total CC Change(1) Performance for Select Products $458 10% (8)% $ millions $348 8% (8)% $248 6% (1)% (2) $142 3% 11% $103 2% (24)% No
Slide 29: Adjusted EBITDA Reconciliation – Fourth Quarter 2022
Data on this slide reflects revisions to previously reported financial results related to the Form 8-K/A filed March 1, 2023 Fourth Quarter 2022 Adjusted 2022 2021 EBITDA Reconciliation Reported Net Loss $(55) $(105) Net Interest Expense $62 $55 Income Tax Expense (Benefit) $(35) $(15) $ millions De
Slide 30: Reconciliation of GAAP Reported to Non-GAAP Adjusted Income
Data on this slide reflects revisions to previously reported financial results related to the Form 8-K/A filed March 1, 2023 Fourth Quarter 2022 Reconciliation 2022 2021 of GAAP GAAP Adjusted Non- GAAP Adjusted Non- Reported to Reported Items GAAP Reported Items GAAP Non-GAAP Amortization of Intangi
Slide 31: Details of Adjustments to Certain GAAP Reported Measures
Fourth Quarter 2022 Details of For the three months ended December 31, 2022 and 2021: Adjustments to 1) 2022 excludes charges associated with integration efforts and external costs related to the acquisitions of Bayer Animal Health and KindredBio ($28 million), asset impairments ($2 million), and th
Slide 32: Adjusted EBITDA Reconciliation – Full Year 2022
Data on this slide reflects revisions to previously reported financial results related to the Form 8-K/A filed March 1, 2023 Full Year 2022 Adjusted 2022 2021 EBITDA Reconciliation Reported Net Loss $(78) $(483) Net Interest Expense $241 $236 Income Tax Expense (Benefit) $6 $(88) $ millions Deprecia
Slide 33: Reconciliation of GAAP Reported to Non-GAAP Adjusted Income
Data on this slide reflects revisions to previously reported financial results related to the Form 8-K/A filed March 1, 2023 Full Year 2022 Reconciliation 2022 2021 of GAAP GAAP Adjusted Non- GAAP Adjusted Non- Reported to Reported Items GAAP Reported Items GAAP Non-GAAP Cost of Sales(1) $1,913 $0 $
Slide 34: Details of Adjustments to Certain GAAP Reported Measures
Full Year 2022 Details of For the twelve months ended December 31, 2022 and 2021: 1) 2021 excludes amortization of inventory fair value adjustments recorded from the acquisition of Bayer Animal Health ($64 million). Adjustments to 2) 2022 excludes charges associated with integration efforts and exte
Slide 35: Financial Guidance – Full Year 2023
Full Year 2023 Financial Total Revenue $4,280 – $4,400 Guidance & Adjusted Gross Margin(1) 55.7% – 56.4% Additional Operating Expenses $1,580 – $1,605 Assumptions Adjusted EBITDA(1) $920 – $1,000 Adjusted EBITDA Margin(1) 21.5% – 22.7% $ millions, except Depreciation Approx. $145 per share values In
Slide 36: EBITDA Guidance Reconciliation – Full Year 2023
Full Year 2023 EBITDA Reported Net Loss $(157) - $(109) Guidance Reconciliation Net Interest Expense Approx. $315 Income Tax Provision $(27) - $30 $ millions Depreciation and Amortization Approx. $690 EBITDA $819 - $919 Non-GAAP Adjustments Asset Impairment, Restructuring, and Other Special Charges
Slide 37: EPS Guidance Reconciliation – Full Year 2023
Full Year 2023 EPS Guidance Reconciliation Reported Loss per Share $(0.32) - $(0.22) Amortization of Intangible Assets Approx. $1.07 Asset Impairment, Restructuring, and Other Special Charges(1) $0.19 - $0.23 Subtotal $1.26 - $1.30 Tax Impact of Adjustments $(0.25) - $(0.22) Total Adjustments to Ear
Slide 38: EBITDA Guidance Reconciliation – First Half 2023
First Half 2023 EBITDA Reported Net Loss $(53) - $(22) Guidance Reconciliation Net Interest Expense Approx. $140 Income Tax Provision $(17) - $15 $ millions Depreciation and Amortization Approx. $350 EBITDA $421 - $484 Non-GAAP Adjustments Asset Impairment, Restructuring, and Other Special Charges A
Slide 39: EPS Guidance Reconciliation – First Half 2023
First Half 2023 EPS Guidance Reconciliation Reported Loss per Share $(0.11) - $(0.04) Amortization of Intangible Assets Approx. $0.54 Asset Impairment, Restructuring, and Other Special Charges(1) $0.14 - $0.16 Subtotal $0.68 - $0.70 Tax Impact of Adjustments $(0.16) - $(0.14) Total Adjustments to Ea