Elanco Animal Health Incorporated · NYSE:ELAN
Elanco Animal Health — Q3 2024 Earnings Presentation
37 slides from Elanco Animal Health's earnings presentation, Nov 7, 2024
Slide 1: 2024 Earnings – Third Quarter
2024 Earnings – Third Quarter November 7, 2024
Slide 2: Notices and Disclaimers
2024 | Q3 Earnings Notices and Disclaimers Forward-Looking Statements. This press release 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 an
Slide 3: On Today's Call
2024 | 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: Growth Continues, Innovation Milestones Delivered
2024 | Q3 Earnings Growth Continues, Revenue Growth Continues Innovation Milestones Excluding aqua, Q3 organic CC3 growth of 1%; 5th consecutive quarter of underlying growth, led by U.S. farm animal and international pet health Delivered Innovation Shifts to Commercial Q3 2024 vs Zenrelia approved,
Slide 5: Organic Constant Currency Revenue Growth of 1%, Building on Momentum from H1 2024
2024 | Q3 Earnings Q3 2023 to Q3 2024 Revenue Bridge Organic Constant Currency Revenue Growth of 1%, Building on Momentum from 4% Growth in H1 2024 Revenue 1% $ millions 2% Growth1 3% Decline Growth1 $(41) $1,068 11% 3% 4% 2% Growth Decline1 Decline Growth $1,030 Q3 2023 Aqua FX Rates Divestiture &
Slide 6: Highlights Since Our Last Earnings Call
2024 | Q3 Earnings Innovation Innovation Sales Credelio Quattro Bovaer Launched Updated full year and Zenrelia with California state innovation revenue approved by U.S. approval, first feeding guidance to $420M FDA; Zenrelia and multiple CPGs to $450M launched in U.S. and contracted to buy inset Bra
Slide 7: On-Track to Deliver $600M-$700M Contribution in 2025
2024 | Q3 Earnings Innovation revenue expectations tightened to $420M-$450M in 2024 On-Track to Deliver $600M-$700M Contribution in 2025 $420-$450 2024E $ millions Key Products $275 $112 $120 2023A Pet Health Farm Animal $100 $133 $74 2022A $80 2021 $72 Pet Health $60 2021A $32 2022 $40 $14 $20 2023
Slide 8: Updates for Key Late-Stage Innovation Products
2024 | Q3 Earnings Updates for Key Late-Stage Innovation Products A JAK inhibitor targeting A broad spectrum oral A first-in-class methane control of pruritus and parasiticide covering fleas, reducing feed ingredient atopic dermatitis in dogs ticks and internal parasites for cattle (Dairy) Different
Slide 9: Late-Stage Pipeline Moves Largely Towards Commercialization
2024 | Q3 Earnings Historic innovation launch window through 2025 Late-Stage Pipeline Moves Largely Towards Commercialization Primary Peak Sales Asset Regulator Species Approval1 Launch2 Opportunity3 Commentary Experior First-in-class; Combo clearance approvals FDA (Rx) Ammonia Reduction for expande
Slide 10: Financial Results
Financial Results Third Quarter 2024
Slide 11: Impact of Price, Rate, and Volume on Revenue
2024 | Q3 Earnings Third Quarter 2024 Impact of Price, Rate, and Volume on Revenue Organic1 Aqua Organic CC2 Revenue Price FX Rate Volume Volume Total Change Pet Health $486 2% 0% (4)% (2)% (2)% Cattle $253 (1)% 5% 6% Poultry $188 (1)% 2% 3% Swine $88 0% (5)% (5)% Aqua $1 0% (98)% (98)% n/a Farm Ani
Slide 12: Revenue by Geography and Species
2024 | Q3 Earnings Third Quarter 2024 Revenue by Geography and Species Organic CC1 2024 2023 Change (%) Change (%) US Pet Health $289 $301 (4)% (4)% Int’l Pet Health $197 $194 2% 2% Total Pet Health $486 $495 (2)% (2)% US Farm Animal $194 $174 11% 11% Int’l Farm Animal1 $336 $388 (13)% (3)% Total Fa
Slide 13: Adjusted Income Statement Highlights
2024 | Q3 Earnings Third Quarter 2024 Adjusted1 Income Statement Highlights Including Impact from Aqua Divestiture $ millions, except per share values 2024 2023 Change ($)2 Change (%)2 Revenue $1,030 $1,068 $(38) (4)% Cost of Sales $492 $486 $6 1% Adjusted Gross Profit $538 $582 $(44) (8)% Adjusted
Slide 14: Adjusted EBITDA and Adjusted EPS Impacted by Strategic Investments & Lower Interest Expense
2024 | Q3 Earnings Third Quarter 2024 Adjusted EBITDA and Adjusted EPS Impacted by Strategic Investments & Lower Interest Expense Q3 Adjusted EBITDA Q3 Adjusted EPS $ millions $(27) vs. Prior Year $(24) Excluding Aqua divestiture ~$(0.09) ~$(0.04) from $214 aqua divestiture +$8 $0.18 vs. Midpoint +$
Slide 15: Key Balance Sheet and Cash Flow Metrics
2024 | Q3 Earnings Key Balance Sheet and Cash Flow Metrics Debt Balances as of September 30, 2024 $1.3B of Debt Paydown in Q3 2024; $ millions Adjusted net leverage ratio2 decreased to 4.3x from 5.7x at the end of Q3 2023 $4,387 $490 Expect full year Gross Debt reduction of $1.45B; On track to achie
Slide 16: Financial Guidance
Financial Guidance Fourth Quarter and Full Year 2024
Slide 17: Financial Guidance – Full Year 2024
2024 | Q3 Earnings 2024 Full Year Financial August November Comments Guidance Revenue $4,410 - $4,460 $4,420 - $4,450 3% organic CC2 growth Reported Net Income $314 - $352 $286 - $317 Includes gain on aqua divestiture Reflects expected increase $ millions, except Adjusted EBITDA1 $900 - $940 $900 -
Slide 18: Financial Guidance – Fourth Quarter 2024
2024 | Q3 Earnings Fourth Quarter 2024 Financial Total Revenue $1,000 - $1,030 Guidance Reported Net Loss $(59) - $(32) Adjusted EBITDA1 $167 - $197 $ millions, except per share values Reported Diluted EPS $(0.12) - $(0.06) Adjusted Diluted EPS1 $0.13 - $0.18 Impact of FX vs Prior Year Improved Bott
Slide 19: Expected Adj. EBITDA and Adj. EPS Growth Driven by Improved Gross Profit
2024 | Q3 Earnings Fourth Quarter 2024 Expected Adj. EBITDA and Adj. EPS Growth to be Driven by Improved oss P ofi and Lapping ‘23 Hyp infla ion H adwind Q4 2024 Adjusted EBITDA Guidance Q4 2024 Adjusted EPS Guidance $0.13- $0.18 $167- $0.02 from Argentina $197 Devaluation, Duty & Other $(23) $165 $
Slide 20: 2025 Outlook Calls for Topline Growth Acceleration
2024 | Q3 Earnings 2025 Outlook Calls for Topline Growth Acceleration Adjusted Revenue Net Expectations EBITDA Growth Growth1 Leverage MSD %, ex-Aqua, with Accelerates to MSD % LSD % including U.K. CMO High 3x to Low 4x Tailwinds Headwinds Innovation sales ramp to $600-$700 million driven by Competi
Slide 21: Appendix
Appendix Reference slides and GAAP reported to non-GAAP adjusted reconciliations
Slide 22: Impact of Price, Rate, and Volume on Revenue – Nine Months 2024
2024 | Q3 Earnings Nine Months 2024 Impact of Price, Rate, and Volume on Revenue Organic1 Aqua Organic CC2 Revenue Price FX Rate Volume Volume Total Change Pet Health $1,704 3% 0% (2)% 0% 1% 1% Cattle $754 0% 8% 8% Poultry $583 (1)% 7% 8% Swine $262 (1)% (8)% (7)% Aqua $81 (2)% (32)% (39)% (9)% Farm
Slide 23: Revenue by Geography and Species – Nine Months 2024
2024 | Q3 Earnings Nine Months 2024 Revenue by Geography and Species Organic CC1 2024 2023 Total (%) Change (%) US Pet Health $960 $995 (4)% (4)% Int’l Pet Health $744 $693 7% 7% Total Pet Health $1,704 $1,688 1% 1% US Farm Animal $596 $518 15% 15% Int’l Farm Animal $1,084 $1,144 (5)% (1)% Total Far
Slide 24: Adjusted Income Statement Highlights – Nine Months 2024
2024 | Q3 Earnings Nine Months 2024 Adjusted1 Income Statement Highlights Including Impact from Aqua Divestiture $ millions, except per share values 2024 2023 Change ($) Change (%)2 Revenue $3,419 $3,382 $37 1% Cost of Sales $1,502 $1,413 $89 6% Adjusted Gross Profit $1,917 $1,969 $(52) (3)% Adjuste
Slide 25: Confident in Liquidity and Ability to Manage Debt Obligations
2024 | Q3 Earnings Confident in Liquidity and Ability to Manage Debt Obligations Debt Maturities & Mandatory Payments Key Debt Information1 $ millions Total Gross Debt: $4.4 billion $3,000 • Term Loans: $3.5 billion; bears interest of 1-Month Term SOFR+185 bps • Senior Notes: $750 million; bears int
Slide 26: Factors Impacting Cash Flow and Leverage
2024 | Q3 Earnings Factors Impacting Cash Flow and Leverage $ millions 2021 2022 2023 2024 Projected 2025 Expectations Minimal restructuring spend; Project1 / Restructuring Cash $325 $194 $149 $40 - $50 no project spend expected Lower cash interest driven Cash Interest $221 $266 $379 Approx. $295 by
Slide 27: Financial Guidance – Full Year 2024
2024 | Q3 Earnings Full Year 2024 Financial August November $4,410 – $4,460 $4,420 – $4,450 Guidance Total Revenue Adjusted Gross Margin1 55.1% – 55.6% 55.2% – 55.3% & Additional Operating Expenses $1,645 – $1,660 $1,660 – $1,670 Assumptions Adjusted EBITDA1 $900 – $940 $900 – $930 Adjusted EBITDA M
Slide 28: Adjusted EBITDA Reconciliation – Third Quarter 2024
2024 | Q3 Earnings Third Quarter 2024 Adjusted 2024 2023 EBITDA Reported Net Gain (Loss) $364 $(1,096) Reconciliation Net Interest Expense $58 $72 Income Tax Expense (Benefit) $195 $(1) Depreciation and Amortization $169 $173 $ millions EBITDA $786 $(852) Non-GAAP Adjustments Cost of Sales $- $1 Ass
Slide 29: Reconciliation of GAAP Reported to Non-GAAP Adjusted Income Statement Items
2024 | Q3 Earnings Third Quarter 2024 Reconciliation 2024 2023 of GAAP GAAP Adjusted Non- GAAP Adjusted Non- Reported Items GAAP Reported Items GAAP Reported to Cost of Sales $492 $- $492 $487 $1 $486 Non-GAAP Amortization of Intangible Assets $133 $133 $- $140 $140 $- Adjusted Asset Impairment, Res
Slide 30: Details of Adjustments to Certain GAAP Reported Measures
2024 | Q3 Earnings Third Quarter 2024 Details of For the three months ended September 30, 2024 and 2023: Adjustments to (1) Adjustments of $17 million for the three months ended September 30, 2024, principally reflected $15 million of asset impairments tied to the financial difficulties of our contr
Slide 31: Adjusted EBITDA Reconciliation – Nine Months 2024
2024 | Q3 Earnings Nine Months 2024 Adjusted 2024 2023 EBITDA Reported Net Loss $346 $(1,090) Reconciliation Net Interest Expense $189 $210 Income Tax Expense $193 $22 $ millions Depreciation and Amortization $498 $523 EBITDA $1,226 $(335) Non-GAAP Adjustments Cost of Sales $- $2 Asset Impairment, R
Slide 32: Reconciliation of GAAP Reported to Non-GAAP Adjusted Income Statement Items
2024 | Q3 Earnings Nine Months 2024 Reconciliation 2024 2023 of GAAP GAAP Adjusted Non- GAAP Adjusted Non- Reported to Reported Items GAAP Reported Items GAAP Cost of Sales1 $1,502 $- $1,502 $1,415 $2 $1,413 Non-GAAP Amortization of Intangible Assets $397 $397 $- $410 $410 $- Adjusted Asset Impairme
Slide 33: Details of Adjustments to Certain GAAP Reported Measures
2024 | Q3 Earnings Nine Months 2024 Details of For the nine months ended September 30, 2024 and 2023: Adjustments to (1) Adjustments of $143 million for the nine months ended September 30, 2024, principally included impairment charges of $53 million related to a pet health IPR&D asset (IL-4R) during
Slide 34: EBITDA Guidance Reconciliation – Full Year 2024
2024 | Q3 Earnings Full Year 2024 EBITDA Guidance Reported Net Income $286 - $317 Reconciliation Net Interest Expense Approx. $235 Income Tax Benefit $190 - $199 $ millions Depreciation and Amortization Approx. $660 EBITDA $1,373 - $1,413 Non-GAAP Adjustments Asset Impairment, Restructuring, and Oth
Slide 35: EPS Guidance Reconciliation – Full Year 2024
2024 | Q3 Earnings Full Year 2024 EPS Guidance Reconciliation Reported Earnings per Share $0.58 - $0.64 Amortization of Intangible Assets Approx. $1.06 Asset Impairment, Restructuring, and Other Special Charges $0.29 - $0.31 Gain on Divestiture Approx. $1.28 Other Expenses, Net Approx. $0.04 Subtota
Slide 36: EBITDA Guidance Reconciliation – Fourth Quarter 2024
2024 | Q3 Earnings Fourth Quarter 2024 EBITDA Guidance Reconciliation Reported Net Loss $(59) - $(32) Net Interest Expense Approx. $50 $ millions Income Tax Provision $(1) - $8 Depreciation and Amortization Approx. $165 EBITDA $151 - $187 Non-GAAP Adjustments Asset Impairment, Restructuring, and Oth
Slide 37: EPS Guidance Reconciliation – Fourth Quarter 2024
2024 | Q3 Earnings Fourth Quarter 2024 EPS Guidance Reconciliation Reported Loss per Share $(0.12) - $(0.06) Amortization of Intangible Assets Approx. $0.26 Asset Impairment, Restructuring, and Other Special Charges1 $0.02 - $0.03 Subtotal $0.28 - $0.29 Tax Impact of Adjustments $(0.04) - $(0.05) To