Elanco Animal Health Incorporated · NYSE:ELAN
Elanco Animal Health — Q1 2024 Earnings Presentation
33 slides from Elanco Animal Health's earnings presentation, May 8, 2024
Slide 1: 2024 Earnings – First Quarter
2024 Earnings – First Quarter May 8, 2024
Slide 2: Notices and Disclaimers
2024 | Q1 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 | Q1 Earnings On Today’s Call Jeff Simmons Todd Young Elanco Animal Health Elanco Animal Health President and Chief Executive Vice President, Executive Officer Chief Financial Officer 3
Slide 4: Topline Growth Continues, Confidence in 2024 and Innovation
2024 | Q1 Earnings Topline Growth Continues, Confidence in 2024 Momentum & Execution on Topline and Innovation Excluding the ERP blackout in 2023, Q1 CC3 growth estimated at 3%-5%, building on 5% CC revenue growth in Q3 and Q4 of 2023 Confidence in Innovation Innovation revenue of $100M in Q1; Expec
Slide 5: Underlying Revenue Growth Estimated at 3% to 5%, Building on Momentum
2024 | Q1 Earnings Q1 2023 to Q1 2024 Revenue Bridge Underlying Revenue Growth Estimated at 3% to 5%1, Building on Momentum from 5% growth in H2 2024 Revenue 3%-5% $ millions 7%-9% Growth1 Decline 5%-7% 1%-2% Growth1 Growth1 $(90) – $1,257 $(110) ~11% 4% ~9% Growth1 CC2 Decline Growth1 ~3% ~2% $1,20
Slide 6: Q1 2024 Highlights
2024 | Q1 Earnings Innovation Innovation Sales Bovaer® clearance Zenrelia and delivered $100M in Q1, expected before end of Credelio Quattro or 4ppt of growth, led May as the carbon full approval expected by Experior and AdTab credit marketplace in Q3 2024, peak sales continues to develop expectatio
Slide 7: Progress and Outlook for Elanco's Next Era of Growth
2024 | Q1 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 8: On-Track to Deliver $600M-$700M Contribution in 2025
2024 | Q1 Earnings Innovation revenue tracking in-line with expectations On-Track to Deliver $600M-$700M Contribution in 2025 $ millions $100 Key Product Launches $100 $275 $80 Pet Health Farm Animal $133 $57 2021 $60 Pet Health Total $40 $72 $28 2022 $10 $20 2023 Farm Total Zenrelia $0 2024-2025 Cr
Slide 9: Confident in U.S. Approval Timing of Key Innovation Products
2024 | Q1 Earnings Confident in U.S. Approval Timing of Key Innovation Products Zenrelia Credelio Quattro Bovaer 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 parasit
Slide 10: Financial Results
Financial Results First Quarter 2024
Slide 11: Impact of Price, Rate, and Volume on Revenue
2024 | Q1 Earnings First Quarter 2024 Impact of Price, Rate, and Volume on Revenue Revenue Price FX Rate Volume Total CC1 Change Pet Health $639 3% 0% (8)% (5)% (5)% Cattle $244 0% (2)% (2)% Poultry $197 0% 8% 8% Swine $84 (1)% (18)% (17)% Aqua $31 (3)% (23)% (20)% Farm Animal $556 0% 0% (3)% (3)% (
Slide 12: Revenue by Geography and Species
2024 | Q1 Earnings First Quarter 2024 Revenue by Geography and Species Estimated ERP 2024 2023 Change CC1 Change Blackout Impact US Pet Health $333 $361 $(28) (8)% ~(11)% Int’l Pet Health $306 $314 $(8) (3)% ~(12)% Total Pet Health $639 $675 $(36) (5)% (10)% to (12)% US Farm Animal $197 $182 $15 8%
Slide 13: Adjusted Income Statement Highlights
2024 | Q1 Earnings First Quarter 2024 Adjusted1 Income Statement Highlights Estimated ERP $ millions, except per share values 2024 2023 Change ($) Change (%) Blackout Impact Revenue $1,205 $1,257 $(52) (4)% (7)% to (9)% Cost of Sales $515 $493 $22 4% Adjusted Gross Profit $690 $764 $(74) (10)% (9)%
Slide 14: Adjusted EBITDA and Adjusted EPS Impacted by Prior Year ERP Blackout
2024 | Q1 Earnings Q1 2023 to Q1 2024 Bridge Adjusted EBITDA and Adjusted EPS Impacted by Prior Year ERP Blackout, Manufacturing Slowdown and Pet Health Investments Q1 2024 Adjusted EBITDA Q1 2024 Adjusted EPS ~$(70) – ~$(0.11) – ($90) ~$(5) $(0.14) ~$0.01 $379 vs. Prior Year vs. Prior Year Excludin
Slide 15: Key Balance Sheet and Cash Flow Metrics
2024 | Q1 Earnings Key Balance Sheet and Cash Flow Metrics Debt Balances as of March 31, 2024 Operating Cash Flow (OCF) of $2M in Q1 2024; $ millions YOY increase of $147M primarily driven by improved inventory performance $13M of Debt Paydown in Q1 2024; Adjusted net leverage ratio2 increased to 6.
Slide 16: Financial Guidance
Financial Guidance Second Quarter and Full Year 2024
Slide 17: Financial Guidance
2024 | Q1 Earnings 2024 Full Year Financial February May Comments Guidance Revenue $4,450 - $4,540 $4,460 - $4,515 Raised CC2 growth to 2% to 3%; Updated to reflect strengthening U.S. dollar Reported Net Loss $(62) - $(17) $(45) - $(3) $ millions, except Updated to reflect Q1 overperformance and Adj
Slide 18: FY 2024 CC Revenue Growth Expectations Improve to 2% to 3%
2024 | Q1 Earnings February Guidance to May Guidance Bridge FY 2024 CC1 Revenue Growth Expectations Improve to 2% to 3%, Led by U.S. Farm Animal and International Pet Health 2024 Revenue ~1% Improvement in CC1 Growth 1% - 3% $4,450-$4,540 CC 1 Growth $4,417 ~$(30) ~$15 - $35 ~$(20) 2% - 3% $4,460-$4
Slide 19: Expected Improvement in Adjusted EBITDA and Adjusted EPS Offset by FX
2024 | Q1 Earnings February Guidance to May Guidance Bridge Expected Improvement in Adjusted EBITDA and Adjusted EPS Offset by Unfavorable FX Impact 2024 Adjusted EBITDA 2024 Adjusted EPS +$10 +$0.04 vs. Midpoint of vs. Midpoint of Prior Guidance Prior Guidance Excluding FX Excluding FX $23-$33 ~$18
Slide 20: Financial Guidance Second Quarter 2024
2024 | Q1 Earnings Second Quarter 2024 Financial Q2 Guidance Comments Guidance Revenue $1,145 - $1,170 Expect 1% to 3% CC2 growth, excluding $(90)-$(110) million estimated impact from ERP3 in 2023 Reported Net Income $0 - $20 Including $20-$25 million incremental investment in Pet Health; $ millions
Slide 21: Underlying Growth Expected to Continue; H1 CC Growth 2%-3%
2024 | Q1 Earnings Q1 & Q2 2023 to 2024 Revenue Bridges Underlying Growth Expected to Continue with Benefit from ERP Blackout in Q2; H1 CC growth 2%-3% First Quarter Second Quarter $ millions $ millions 3-5% 7-9% Growth Decline ~Flat 9-11% Growth 10%-13% ~$40 – ~$(90)- $60 $(110) 1-3% CC Growth1 ~2%
Slide 22: Adjusted EBITDA and Adjusted EPS Declines Impacted by ERP Blackout
2024 | Q1 Earnings Q2 2023 to Q2 2024 Bridge Adjusted EBITDA and Adjusted EPS Declines Impacted by Prior Year ERP Blackout, Manufacturing Slowdown and Pet Health Investments Q2 2024 Adjusted EBITDA Q2 2024 Adjusted EPS ~$(52) ~$(0.07) vs. Prior Year vs. Prior Year Excluding Estimated ~$(0.11) – Excl
Slide 23: Factors Impacting Cash Flow and Leverage
2024 | Q1 Earnings Factors Impacting Cash Flow and Leverage 2024 2024 $ millions 2021 2022 2023 Projected Comments Lower project spend partially Project1/Restructuring Cash $325 $194 $149 $40 - $50 offset by Q1 2024 restructuring Cash Interest $221 $266 $379 Approx. $345 Cash Taxes $151 $93 $95 $80
Slide 24: Appendix
Appendix Reference slides and GAAP reported to non-GAAP adjusted reconciliations
Slide 25: Confident in Liquidity and Ability to Manage Debt Obligations
2024 | Q1 Earnings Confident in Liquidity and Ability to Manage Debt Obligations Debt Maturities & Mandatory Payments Key Debt Information1 $ millions Total Gross Debt: $5.8 billion $3,000 • Term Loans: $4.7 billion; bears interest of 1-Month Term SOFR+185 bps • Senior Notes: $750 million; bears int
Slide 26: Financial Guidance Full Year 2024
2024 | Q1 Earnings Full Year 2024 February May Financial Total Revenue $4,450 – $4,540 $4,460 – $4,515 Guidance Gross Margin 55.9% – 56.5% 55.6% – 56.1% & Additional Operating Expenses $1,650 – $1,675 $1,650 – $1,670 Assumptions Adjusted EBITDA1 $960 – $1,010 $960 – $1,000 Adjusted EBITDA Margin1 21
Slide 27: Adjusted EBITDA Reconciliation
2024 | Q1 Earnings First Quarter 2024 Adjusted 2024 2023 EBITDA Reconciliation Reported Net Income $32 $103 Net Interest Expense $66 $64 Income Tax Expense $(20) $5 $ millions Depreciation and Amortization $165 $173 EBITDA $243 $344 Non-GAAP Adjustments Cost of Sales $0 $1 Asset Impairment, Restruct
Slide 28: Reconciliation of GAAP Reported to Non-GAAP Adjusted Income Statement Items
2024 | Q1 Earnings First Quarter 2024 Reconciliation of GAAP 2024 2023 Reported to GAAP Reported Adjusted Items Non- GAAP GAAP Reported Adjusted Items Non- GAAP Non-GAAP Cost of Sales1 $515 $0 $515 $494 $1 $493 Adjusted Amortization of Intangible Assets $133 $133 $0 $134 $134 $0 Income Asset Impairm
Slide 29: Details of Adjustments to Certain GAAP Reported Measures
2024 | Q1 Earnings First Quarter 2024 Details of For the three months ended March 31, 2024 and 2023: Adjustments to 1) Adjustments of $1 million for the three months ended March 31, 2023, related to amortization of an inventory fair value adjustment recorded from the acquisition of certain assets of
Slide 30: EBITDA Guidance Reconciliation Full Year 2024
2024 | Q1 Earnings Full Year 2024 EBITDA Reported Net Loss $(45) - $(3) Guidance Net Interest Expense Approx. $275 Reconciliation Income Tax Benefit $(13) - $(1) Depreciation and Amortization Approx. $670 $ millions EBITDA $883 - $934 Non-GAAP Adjustments Asset Impairment, Restructuring, and Other S
Slide 31: EPS Guidance Reconciliation Full Year 2024
2024 | Q1 Earnings Full Year 2024 EPS Guidance Reconciliation Reported Loss per Share $(0.09) - $(0.01) Amortization of Intangible Assets Approx. $1.07 Asset Impairment, Restructuring, and Other Special Charges1 $0.12 - $0.14 Subtotal $1.23 - $1.21 Tax Impact of Adjustments $(0.26) - $(0.24) Total A
Slide 32: EBITDA Guidance Reconciliation Second Quarter 2024
2024 | Q1 Earnings Second Quarter 2024 EBITDA Reported Net Income $0 - $20 Guidance Net Interest Expense Approx. $70 Reconciliation Income Tax Provision $(9) - $(4) Depreciation and Amortization Approx. $170 $ millions EBITDA $223 - $248 Non-GAAP Adjustments Asset Impairment, Restructuring, and Othe
Slide 33: EPS Guidance Reconciliation Second Quarter 2024
2024 | Q1 Earnings Second Quarter 2024 EPS Guidance Reconciliation Reported Earnings per Share $0.00 - $0.04 Amortization of Intangible Assets Approx. $0.27 Asset Impairment, Restructuring, and Other Special Charges1 $0.03 - $0.02 Subtotal $0.30 - $0.27 Tax Impact of Adjustments Approx. $(0.07) Tota