ELAN - Earnings call 3 2023 | Elanco Animal Health Incorporated

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Operator

Good morning. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Elanco Third Quarter 2023 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Katy Grissom, Head of Investor Relations.

You may begin your conference.

Katy Grissom

morning. Good joining Animal for XXXX Third on Call. Earnings us you Health's Elanco Quarter Thank Head Relations. of Grissom, Katy I'm Investor

Joining me Chief on slides the President Scott and Investor today's from referenced call are Executive Parucker of are Todd Jeff during Officer; Relations today's Young, available Relations. section our Investor Financial call and Chief Officer; The Simmons, on our elanco.com.

cause statements. and actual on our uncertainties and expectations are Today's from to based that to our discussion current results are could will differ materially These statements include and subject forward-looking risks forecast. assumptions

statements. the more information, latest factors For filed do update press earnings release and forward-looking any XX-K well see with our risk in undertake in SEC. We to not today's as the XX-Q as duty Form any

focus non-GAAP questions. in and remarks, our of today included we'll our to are measures be remarks After measures. your non-GAAP earnings the financial appendix today's Our in happy prepared press release. these will of Reconciliations the slides on take

call I'll turn to the now over Jeff.

Jeffrey Simmons

Farm portfolio constant and for accelerating of our revenue X% growth leverage core innovation, enhanced . Along morning, Good for and global was a unfavorable volumes dollar adjusted delivering was conditions, line, exceeded Health everyone. reported Katy. omnichannel stabilizing our of capabilities key the late metrics improving U.S. our occurred Thanks, quarter. the contribution strengthening differentiated and revenue in currency growth quarter, while market currency strategic our from with of of by and the growth. We non-GAAP weathering and adjusted enabled diverse price EPS leadership. the approach, on growth. Pet that by strong top Constant driven all EBITDA third X% Animal expectations Elanco X%

EPS and Starting of for driven and volume growth for growth Slide adjusted to continued Health X% provides on Farm of price EBITDA both and X%. this adjusted X. sequential XXXX. and Elanco in by the growth of year-over-year growth improvement believe We was the Animal, In quarter, fourth leading growth the X% quarter third in Pet line top framework in

innovation We of blockbuster a and products, for progress including quarter, Improving in leverage to FDA operating and capital of we half $XXX reducing first cash X on priorities with working made third Elanco. advance cash path significant In remain flow improve generation in to submissions towards debt was net efforts the late-stage quarter, XXXX. flow. $XXX our for approval cash we the potential all repaid continue and million, as operating the million

tightening full to As we strengthening headwinds look are our call. August outperformance we ranges reflect year third since guidance and to incremental U.S. quarter the quarter, fourth the dollar our from

EPS our FX currency adjusted revenue adjusted We despite the for guidance, EBITDA to constant the and now growth for headwinds. are expecting the midpoint raising of flat both year growth midpoint and raising increasing X% guidance

Moving innovation supply. was primarily on to our growth core stabilizing line X, business volumes, by price our the Slide currency benefited driven international X% revenue for with from global and the In expectations, our improved quarter business.

offset voice, vaccines market physical in pressure quarter, was innovation, the later and third softer execution for availability revenue supply the Pet share of end quarter. In as clinic by U.S. a price flat vet was Health improved across and competitive

vet business visit visits, we subset track trends sensitivity only of is industry clinic, of lower global a the As our impact continues the to of our through to XX% isolating sold to portfolio. vet total about our highlight U.S. that the

and desired owners. the the vet the price Outside of business OTC pet channels many in diversity of by leadership points our clinic, provides

seen treatment Our particularly the OTC retail and of in and year-to-date XX% with recent allow resiliency to portfolio the we and leading market, for broad value of channels. us innovation OTC growth advantage products take offerings, have OTC to

products channels outpaced rates. U.S. retail positions where both clinic Pet Overall, in differentiated prescription the growth approach us and see programs greater resulting Health to higher in prescription subscription enrollment continue our We other products e-commerce vet omnichannel believe is well OTC compliance globally. and as the OTC in channels, and we well in across both in for as

The to to Moving environment and commercial driven of outside constant U.S. XX% currency both Europe Advantage family and of economic international for compared last revenue capabilities growth pet the in health. third quarter better by was growth as the to Seresto expanded contributing the year double-digit

Adtab and new led contributed to by products Additionally, Credelio Plus growth.

poultry by animal, the X% share currency enabled in supply U.K. contributor revenue of the primarily increased markets, quadrants price, growth X revenue largest constant key where and our farm international and strong capacity. delivered was underlying Next, growth like by cattle growth, driven markets

after Finally, products. returned X% several driven of to certain offset innovation, quarters by business of our and impacting Animal poultry primarily was Growth U.S. regulatory rotations cattle Experior, at decline. timing partially changes growth by Farm

Experior's million of by progress $XX exit rate as we the encouraged remain expected to and million $XX are XXXX. for revenue We the of approximately annualized confident product in run

Moving highlight productivity. Starting to last to several of innovation, with drivers since and I'd our portfolio X. our strategy key Slide like call. productivity

cash We pay to are improving debt on conversion enable very focused down.

earnings, are acknowledging metric. the While we margin EVA to our by prioritizing carry. cash in expansion like shift part supported leverage bonus Elanco currently remains focus is generation, broadly our important, The cash we company-wide

year. to cash completed this Importantly, necessary our we integration the have earlier for support outlay cost project systems nearly

improving this working X% X% continued with efforts us Health was in Animal. the we growth in flow and portfolio. net and year operating project Price on in Pet Farm With our quarter, expect cash behind X% next capital, improved

We continue least the for expect full to at X% year.

Animal. Health vaccines for organization Health growth in manufacturing and to Importantly, in delivered contributing expanded and capacity quality we in the poultry our Pet improved volume quarter, supply Farm growth. third in this, Pet and cattle both Contributing to and saw

of first overall stronger then Overall, with the innovation then we with adding our total complement omnichannel stabilizing global commercial see our approach by volumes our core portfolio increased competitiveness capabilities driven portfolio, into of portfolio. and the and

innovation. on Now

Farm and on innovations Health retail across contributing the Credelio management momentum, gain to the products launched by Animal and on NutriQuest led Pet life continue Experior cycle side, OTC Plus and already side both. with Our

new from these this We to of $XXX expect contribution innovations continue million to revenue year. million $XXX

monoclonal sales of product parvovirus and from be the track availability million supply Our in innovation million $X antibody canine our increased early to $X year. capacity expanded we XXXX, key contributor remains for allowing expect a XXXX, to next on in supply-constrained growth to

These half XXXX. On upon completed we towards and as for potential FDA Bovaer canine be have JAK known the approval, first in path continue dermatology, for U.S. late-stage pipeline, to inhibitor of Credelio Quattro, have Zenrelia. submissions a blockbusters the which, our X will approval

updated today's presentation. with Canada Slide on of our globalization initiated we in submissions X chart of Additionally, ZeNRELIA innovation Japan. and We've

exciting we as to as an Elanco at revenue is This time growth returned a company.

livestock entering Pet opportunity will sustainability. drivers We era a emerging new of We growth going sustainable in the believe be and in forward. areas these are the space of of Health

in So let area. our on few me progress each share a specifics

competitiveness physical deepen innovation. we increasing our commercial availability, the voice, U.S. have with and relationships enablers share voice, optimizing sales Health focused veterinary team are pricing, our Pet Pet highlighted For To our we're on enhance strategic our clinics. to leveraging Health, enhancing of and of of previously expanding share expanding

expertise. animal approximately team. There health XX are a and sales professionals experienced strong them veterinarian our relationships is from interest professionals, We XX% bringing with across targeting expansion,

rates. is territories, the expansion penetration time facing expected and our drive reorder more veterinary for increased smaller will and clinic to with create For team, this allowing clinics,

reach creating several we data, connected XX% the transformed more model commercial of the over Next analytics voice tools over share effectively in can to and off-line efficiently and of years, have an multichannel points, our we and channels, via last clinics X touch Through more experience. veterinary online area, priority clinics through digital using or our integrated reach approach.

implementing Xx in pain for cats, this with our ZORBIUM, When product experience optimized saw sales. we a increase postoperative

a developed deliver our sales our the our to ability enhancing sales message increased engine, leading we've an right the to recommendation right pilot earlier of customers, year. time AI-based this Next, at and to force

rolled assistant to personalize broadly, conversion. platform relationships engagements, better deepen We this improve virtual prioritize and enabling and out reps

With by approach strategy XX%. informed Products launched time multichannel more and average to this the is purchase simply using efficient. these sales our launch after analytics enhancements, engagement reduced force

in parasiticides side, Pet retail the of the reimagined On our area availability, leveraging team, physical experience portfolio. OTC has opportunity the OTC our their CPG Health U.S. for

OTC of brick-and-mortar products U.S. in today, pet and context, the tick about universe For XX% in are sold flea

points, are about in of sold only products to XX% opportunities distribution meaningful expand products. Elanco creating those However, of our availability physical

of in like for next expanded distribution stores, and grocery, pharmacy channels points are clubs already targeting many dollar warehouse year. We secured with

year Paired beyond. and expected a with next customers, the this existing opportunity growth to expand volume driver to is with be

voluntary to marketplace, transitioning for provided Elanco which funding Last farmers. a progress creating helping value livestock announced have established a in week, opportunity Appian are livestock market. new they sustainability we for stream carbon shape in Now to in seed that the first-of-its-kind the

within the we're a selling reductions. dairy for farms, monetize food credits, we the companies. last like protocols to verified can excited credits third-party its first robust has Appian science-based first verified Since and about from week's product gas purchase greenhouse leading validated dairy the see processor chain. By using certifying leading producers carbon has Rumensin, supply announcement, emissions our demand and now interventions creating, committed

the manufacturers, we On the greenhouse and value provide animal within ecosystem expect XXX this chain of emissions enable to carbon metric to that committed dairy emerging of growth. retailers global farmer food gas and sustainability livestock supply era farm to to next become note Slide We importance in of the reductions. and approximately chain life X, next have overview who Elanco's million $X inset see fueling health, billion marketplace animal restaurants coming food an of create billion tons $X market significant to would and the

over it turn Todd. I'll that, With to

Todd Young

of and morning. on I'll my quarter EPS. Thank the for description our you, to reported measures, a quarter strong detailed focus please adjusted adjusted a today's release year-over-year reported good with We results. press Jeff, earnings changes so refer third revenue, EBITDA adjusted and everyone. our in growth comments in Today,

on delivered representing or X% Starting in X% in Slide growth We currency. constant revenue, reported $X.XXX billion XX.

we million year-over-year do rates in XXXX. $XX that exchange guidance, of Foreign given to In $X of dollar a strength. the third our reported August million represented a the materialize compared results headwind benefit not expected quarter

growth and quarter. third X% growth X in provides the grew X% contributed in our Pet in Health revenue the X% with of price XX business the volume of quarter Slide quarter. the X%. revenue by quadrants Price was Total

offset clinic. by Our with the business pressures the from growth U.S. competitive in for and veterinary supply vaccines price, return flat sales of innovation was

Based In on continuing retail even flea August our with from broadly last we while to quarter, inventories pet guidance. retail overperformance much to our constant performing $XX XXXX, growth current tick in line partners better our was us the work in and assume in the to quarter down volumes in fourth year, million, significantly view, XX% health, compared during or company's international contributed off-season. third current currency the will benefit our for

year-over-year, omnichannel to market growth. differentiated in market drove fourth quarter, the In to in ramp growth. Improved contribute specifically Europe, expect and conditions and the and our we Credelio innovation year-over-year approach Adtap improvement Plus

Farm to declines currency, Aqua. constant global in swine grew grew partially X% year-over-year. in cattle currency primarily and Total slight offset International by Animal. constant Farm poultry driven parasiticides, by in revenue Animal X% strength Moving and revenue in

Farm continued quarter. improvement in revenue in vaccines continued by last the driven customer of slightly products door X%, Experior. and as quarter primarily U.S. year. the the the third of fourth declined Cattle expect grew grew quarter, Poultry rotations Animal on in ramp we

chain. poultry rotations animal-only Elanco supply Tyson's of the result confirmed antibiotics including in as fourth or We in an their expect products, a quarter Ionis of to poultry into reintroduction on improvement

in their and statement on inflation plants. revenue. Finally, we higher XX.X% Gross and headwind Continuing by distributors growth fourth manage reduced at productivity throughput basis the increased margin point offset partially income down losses quarter XX basis XX. expect of Price purchases their to capital. an our Slide manufacturing reduce as XXX were to approximate from working points the they

and but lever supporting This accelerate balance and Pet capital. key expense increased investments our in business, fourth we project reduce to in Health third as spend increased improve quarter, XXXX, increased the driven and is business work headwind people-related throughout by Operating the working net to sheet by R&D quarter X% expenses. inventory higher expected a is in

Interest in as investment we interest EBITDA volumes. sustainable result but business increased expect will growth million, line year-over-year was it a accelerating higher innovation to of Our contribution $XX core $XX top an helping headwind, million by and increase the a rates. to presents near-term of expense contribute stabilize

gross interest was Our and executed expectations quarter shortly. elaborate transactions below debt of fixed we expense our lower a approximately is the capital which $X in market for XX% the as I and quarter, million will that result debt on

an quarter August of Adjusted Slide EBITDA million third was included the quarter guidance. quarter, was increase quarter. Adjusted compared compared On XX, third results XX%, bridge of to EPS the a to an our of we X% $XXX of the in increase XXXX. X% in

few words million on Slide quarter. me cash, let capital provided operations working by offer was $XXX our XX. Now debt a and on the Cash in

While third million inventory was rate partially quarter, by a the this quarter swap performance was year. benefit last of better was of compared use than larger year. last settlements in a $XX $XX cash million interest from to was This year the

We material inventory, including manage inputs. balance sites, our sheet manage slowing identifying safety chain product and continue at to prioritize API stock to levels manufacturing efforts opportunities certain by and raw production assessing supply to

updates our These while Slides to implement also launch We've to and new gradually in prioritizing over benefits debt reflect the time updated XX deliver efforts we appendix changes expected are information. needs. sheet key to XX balance to product the supply as

billion within And $X reduce rate will next XX rate over tenor the extended to our that we of interest by exposure unwind XXXX. will quarter swaps a year, until restructured we a September, August the our swaps quarters. interest the of of cash which provided the In changes

the approximately years. in Based million statement both expect income million our into statement $XXX entered investment income and our the of we XXXX. third paydown in net $XXX time, X $XXX At a hedge, cash expense expense interest which million now in interest on to we over quarter expected next between that is interest and reduce cash debt these transactions, same

million we to Fed assume cash statement expect million XXXX, million interest and expense $XXX between $XXX interest we rate throughout $XXX interest and flat of no If $XXX million. income XXXX rates adjustments, more

and year-to-date, costs paid in million beginning mentioned, to about reduction the we end our continue we've $XXX XXXX. X.Xx the supporting at Jeff of cash third outlay quarter. project of X.Xx to down declined completed in As integration debt leverage XXXX in a XX% the quarter, and In of second system meaningful the cash from net expect

year and goodwill to non-GAAP We pretax impairment remain expectations of X.Xx. by leverage quarter, impacting paydown and from X.X the confident recorded million we which excluded debt results. $XX noncash be full in our between year-end charge $X.XX, expect our In EPS reported was a

was used while long-term in for The analysis increase rates sharp goodwill primarily the driven accounting plans in consistent. expectations treasury our our by the remain charge long-range impairment

in business XXXX. guidance above the Finally, to for is XX. our let's move our half Slide on second underlying The outlook of expectations

since However, August. the U.S. dollar has strengthened

reflecting the for constant tightening are we expectations midpoint growth, adjusted an revenue of to Today, EBITDA our our guidance adjusted while currency increase ranges and EPS.

of line, from a million top full or the $XX For approximately rates we now expect using a million increase November. of early our guidance headwind for exchange as $XX year August the foreign

X% growth. year expect flat and billion decline to We constant representing compared our revenue currency previous full of X% guidance to $X.X between $X.XX to billion X% growth

$X.XX to We expect EPS million $X $XXX year. adjusted full adjusted billion of $X.XX EBITDA and between and the for

expectations net rate based investment heads to compared expense interest restructuring as on interest EBITDA reduced our than entering swaps. Slide August on our XX, EPS and detailed adjusted adjusted As is we increasing guidance, the

adjust our reducing also to income the that are XXXX, tax foreign effective rate tax U.S. federal return lower actual with for XXXX our income month. results aligned last we We in filed expected inclusions tax in expectations

fourth quarter on detailed is XX. Our guidance Slide

We quarter. to growth half remain of with growth midpoint X% the to the the confident second in the currency at the constant fourth return year for

we providing quarter. and capital pet improved ramp, of the be vet in headwind in for retail expect U.S. partially optimization XX, price, Slide As to drivers on growth and competition the offset poultry improved a expected the supply key anticipated EU detailed distributors, working by innovation and clinic growth, sales market

to it Jeff comments. I'll Now hand for closing back

Jeffrey Simmons

Todd. Thanks,

in our for the far we laying sequential demonstrates XXXX as groundwork return continued performance is working are improvement strategy revenue growth. Our sustainable a to in thus

we I early As on look considerations to provide Slide XXXX, want XX. some to

U.S. First, XXXX. vet on the remains headwinds. Well-known competitive the pressure in in clinic

our efforts stabilize base While our volumes. to commercial helping are

On the and competition Farm continued we're Animal numbers. side, cattle U.S. watching low generic

manage to the in make to and we expect for line, Beyond the marketing launches. internal top inventory and continue sales our investments

create they're expected While to long-term margins, value. tension these will deliver on

U.S. using will headwind into rates, exchange strength anticipate early we next the Finally, continue November from dollar the that foreign year.

growth think with business we constant our tailwinds our antibody, will launch growth parvovirus we're the in accelerate about products of Contributions with XXXX, year. Plus in As Experior, confident for revenue expected next innovation XXXX ramp of Credelio is the and monoclonal currency in from existing the to to contribute half Adtap second primarily XXXX.

our growth our portfolio, differentiated strategic global approach and and price Strategic of enabled leverage by will core volumes and be enhanced underpinned all by diverse stabilizing capabilities our leadership. omnichannel

quarter and exciting XXXX. that, the With going going momentum external the forward. moderate with in and manageable, a environment has sustain to We contribution Elanco the are portfolio growth to the believe Katy for and positive it expectations building to over innovation, capabilities fourth into Q&A. I'll we turn trajectory is

Katy Grissom

Jeff. the we'll Q&A Instructions] the take the provide caller. first session, please [Operator Thanks, Operator, instructions for and then

Operator

from first line from [Operator the of Bank Ryskin Instructions] Your America. of question Michael comes

Michael Ryskin

Great. the guys. on quarter Congrats

Pet want to touch I on U.S. First, Health.

competitive how . lot you next details quarter. pressure here. product it's the parasiticides a of And provide think a few additional headwinds new imagine terms cited have can on what Any and for there in lot these you out will obviously, play quarters? in happening of the I areas? then some mean I thoughts I follow-up. there's I a And launches of

Jeffrey Simmons

I'll Yes. point is I'll just we been before start and quarter chasing a for get We've time. level, Maybe your Elanco. quarter This this Thank to and some you, high started Michael. a at then in. proof big I'll get jump say question. quick for just milestone real and

know, you quarters multiple of seen we've As improvement. sequential

as price growth, able intend And rest we on growing pet we with overall to go Animal noted, opens in QX next blockbusters, up constant we both of we and of hold Pet the without us the we revenue basis this we've see is overall. lot to year But Again, guided currency growth, and grow animal Elanco a again, constant into currency That's to revenue guide X%, and that I'll being X% currency farm grow note opportunity. growing here, Farm X%. as especially Health and a volume year as XXXX. to and intend well growing, constant intend and as growth.

that's to highlight real So execution. that been time, something have want for that its Elanco just the to team we because again, credit disciplined some determined, this focused on in I quite is a been

in working on we We side, commercial the have a side. side the that believe strategy is belief innovation our and deep operational the

to wanted highlight I So we that started. as get

you about U.S. been when I Now and the time. you we in strengthened this in global The you specifically, as it's market, think this think at we're long of at leader portfolio, market payer well. market look business Bayer a XX% pet acquisition our total of know We've a script. look omnichannel us, when

is side even opens to as add before And recent is we that over even given What we marketplace. tracking portfolio Michael, see -- we a time. of from after few And that's our that believe the things. the up that adding the for we increased we we're It's quarters expect that and One, and add today meeting year. by clinics, parvo, X access driven and into expectations. us is competitive have. pain, competitive so that innovation strength. when to our We're rest more far that's come the the when

come of the note, that pricing team. side our to And then has U.S. we've I we've XX of of smaller. the just I'll the that also have so of most commercial get parasiticide got they will the from the where I some territories done And share think physical contributed from and with be from room located we've availability, came to them value-based yesterday geographically come on relationships those best overall the and competitiveness. XX capabilities hired voice out of relationships, the industry, the reps

is So protection we're making has we Quatro a think a and It that lot of innovation. -- believe will of we differentiated, differentiated. that anticipation. progress and be last quite spectrum with then is I in Credelio come

tracking we're year stay and -- expectations competitive that's So close rest our year. would year-to-date, this expect to emphasize next and U.S. I of going with to payer I think and into

Katy Grissom

follow-up? you Mike, did have a

Michael Ryskin

business. bit. Yes. And SG&A and then tied I to investment a in that to want talk the about

an will Pet XX, to kind of sales it XX% XXXX SG&A and and in I EBITDA right how spend few adjusted the force. I in out think it you to Health arrow try spend of and you've play And called if how beyond. terms out next increase about got I times, you a pet at that talked in to with the investment of an quantify the just U.S. a look up Slide relates into year? deck, end wanted slide

adjusted constant specify, want are to or 'XX just I for to So EBITDA growth you revenue just in now? growth pointing currency

Todd Young

saying now, EBITDA in and Todd. long-term the a not to it's to EBITDA. 'XX. we We're grow on Mike, continue as Yes, growth Right Thanks we're for the making the follow-up. commitment expect 'XX beyond

We are blockbusters just the just the Jeff or making without big the commitment with on to that's X constant currency first approval. said, half that path revenue growth is have

SG&A comes of to here drive to to respect on plants. Those are in our going market people increase these investments. then we our manufacturing your our coming are the paying these sales growth reps headwinds down in from on. from getting products gross that margin that Credelio new of to anticipation slowing We'll also the question increases have be With and and investments, will

where all said, be incremental That we driving side on like to while sure driving to making be continuing and the can those our ERP. disciplined launches focus we're of on being it and optimize doing all we synergies cost

QX. as So the into and the continue we we setup feel overall, about good quarter

Operator

Stifel. next comes from line Jon Your Block of question the from

Jonathan Block

to increase of like looking timing out voice share Pet on 'XX time X-ish you of Great. on you theme. Maybe the increased X It the would there's questions of conviction some the and same approvals. Jeff, hires. seem the the are called the of mentioned line Health

the think said already considering organization of Just the of you ramping just force XX I up in sales having, the today. XX

that's more like these then us 'XX? of X- EBITDA does XXXX, less for potential just And on that the these agency the last lag, anything a confident you update. update X I segue And commit could to X be growth with transpired seems X-month sort from and sort the did to, the the that it but include you since that any but growth, into of any 'XX maybe again, revenue timing So yes. to no is in or products? blockbusters know of include supposed there, revenue of commitment Does contribution X exclude those Todd, there's

Todd Young

the take committing I'll the second me committed it the revenue, blockbusters. let first, to excluding X turn them one contribute and We we're do Mike, in back primarily of product half. expect to that. We're independent to growth Jeff. Yes. now, those from But to second right contributions

Jeffrey Simmons

to me let Yes, John, come back you.

of you on There's There's side, need the the launch and to in at the launch. cost X made. make First those these fixed really decisions looking decisions sides side, people were all, time.

exceeded given and And to far of our level level the the expectations of the we team, time talent interest so we've and establish ourselves want to say expertise.

the is be force come, That's our important. are to smaller, driver that's will penetration. this and say, others. that existing growth existing then territories. #X like we parvovirus the we're of part and that our we'll place as and territories look, relationships really awareness the it's launches of sales portfolio there the And critical clinic established, the the organic innovation And beginning as absolutely So do get training when relationships the these the even build into critical we what's that so week, them

knowing on that that cost. decision the there is there. an no portfolio of and is it. So be added of don't investment, timing because U.S. going competitive We're these timing, matter made sales we I and to And exact calling exact the clinics know our conscious win prepared and existing vet we a clearances. will force there be But start these will more

we look, the also Now the committed third in the early progressing relative as We've products. internationally the will submissions submissions put We've these late-stage and with completed Zenrelia Japan. with in to Canada -- follow in well. we've quarter Others quarter,. globalize it's pipeline,

I like regulatory just discussions. markets. pharma, proactive. in by the look, We're human encouraged big We're We're It's would But in we're the It's stage. also, think, iterative. rolling. productive

Paris still we're up market. derms growing, double opening see You livestock and growing sustainability digit, this

think, also, is markets I key. the preparing really So

So that hopefully gives you some framework.

Operator

Your is line Wright from next of Stanley. the Morgan question Erin

Erin Wilson Wright

Great.

seasonal connected differentiator and trend. trends that the business, to this a saw that the you think. you can destock quarter, third So speak on in mentioned should at for You in a less expect that But outsized the fourth was know stocking to you in office And retail is I any there you about? visit some vet quarter the the all quarter? we

how about you channel into just the you of across your consistency availability retail to visibility the growth expand segment? kind physical And in thinking and you retail think are ability about that that pet And mentioned XXXX? how do on

Jeffrey Simmons

XX can months, the the you and Erin, time what Elanco retail the walls we do one with Yes. when in great talent, question, It's an a we're look are Bobby's overall the OTC Bayer in we at side. Talent that it's last spending you're inside with brought awful Elanco talent lot mixed of on. side, that of reimagining if and the And

products right? the Scripting more into an new clinic. There's the scripting. bring going in vet really, I And we're mean e-com growing is to it's and, area.

build, And on I want. point So there's we that team. more portfolio synergy from as as is and they owners credit give the of lot at where the we Bayer, want to and the shop that more coming and life, a said, day to here they meet to pet X more price

these. one hit I So of each just

campaigns, voice. all, We've Advantage since Bayer, that increased campaign had, probably largest we've first Serestone think, share we've I and owned of of that's well. benefited

a we're big way. So awareness tracking in

lot it about gives us isn't mortar a all point total and distribution mortar, bricks this bricks I and think opportunity, comment, but of Erin.

we're for and of is kind we're it's business XX% think and surprising XX% U.S. of in -- in the -- in our OTC brick-and-mortar, leader I so we're to only up instance, that in and the XX%, year-to-date Para, So see

So now, and and to our right grocery. pharmacy in quite focus we've stores areas commitments club to the to locked in from a dollar few

retailers these we a increased looking So needs also have at offer. currently more -- how than and and value can needs different offering create our we're in we lot

lastly, take about a just is is team have I innovation, Bobby and of think overall, as X we've -- think, It and seen created and and of lot that innovation innovation. on brought the doesn't arm the different this of new OTC, products. a we X Ellen advantaged I in and types

it's And grew but oral OTC to into Credelio, just share of We've got in that a that how health. retail I AdTAP the not really at launch lastly, It's that showing international U.S.-based we brand come is is we've ingredients product taken active credit, the point the got this power pet market team, international the there. product. like and is wells. XX% And of and advantage. to of in

focus an and. is an this Again, heavy for emphasize I So area of us. it's

We one of well. as leadership pet vet and the U.S. I to continue we'll in will take retail inside hope and innovators be the say clinic top our share U.S.

Erin Wilson Wright

That's seeing the segment And on headwind then I what across can in helpful. U.S. livestock mentioned that, as elaborate in -- the you you're just dynamics Okay. animal guess entitled farm space? generics you a XXXX.

Jeffrey Simmons

Yes.

couple that livestock to tougher animal as Erin, drive in you at comments segment, think, and I market overall And farm see 'XX think a look animal. in just just a I that. of farm quick the we're going

globally. $X.XX think look still in The better. there's tensions product and rates. it's Poultry trade costs less gone at trading, $X.XX but conversions tensions U.S. or but when and and historical have especially gotten from usually overall global Corn created that's margin. you the the has I profitability, input have to down so, higher high

X too and down and is are on numbers there's demand think recovering prices supply, reg aren't lastly, market, I the and Cattle the China, U.S. that flat. swine got And implants. the matter, much we've changes

see we markets. So those

with long It's this in that durable, time. a we've market. said, resilient business been Now a

growing. still better of moderately much is demand lot and the they've been. Protein candidly, There's than countries a ever demand managing countries are supply at

going as I as do market see a this that's challenged. but steep So don't be I see to valley, a this

we're I positioned. we as look well Elanco, it, at think

with we've cattle, specifically, a drive on grow, see would Experior got I and beef be take cattle There portfolio innovation. dairy continue We environment. this to will help share in to got the business but will even and volatility, time. Boever numbers. we've And and both leadership value-driven less that say, Erin, benefits able over

leaders We're portfolio but we've issue, return will bigger gets team the but and tougher a be hold with challenge good this the smaller. and and much helpful poultry. or U.S. be swine be China market a in got in whether will a will of pockets will Tyson good There the to market, profitability share probably and as

monitor January at So JPMorgan we more that's see we share closely study so in We'll market. and the far. as it what

Operator

Chris question Your from comes JPMorgan. line next from the of Schott

Christopher Schott

guess, just in customer was and that's I the seeing vet economic visit me. I of the about on first, of two trends health side views what interested of the Just pet base. your for the we're implying kind

. one right been some think seeing I just And what of now follow-up of weigh macro what seeing you is Jeff, where then maybe that. versus there? we're the in there's debate in after kind And ongoing much in about issues? how market be capacity we're interested on

Jeffrey Simmons

visits. than lot something great, a question. a vet Actually, maybe less time X%, it's team years critical for going down X monitor Yes, as that most X.X%, great I've but we're the They're company And our is has. sensitive ago. Thanks on, look, we not our it were spent to We're of metric. question.

whether you or pet to they and want There's this still which still driving per it's see younger to a innovation markets to in rewarding industry. of meaningful, pain of We is spend of continue resilience generation, derm, is a And There's visit lot their to think the robust. desire one more very the lot innovation. awareness, actually that's actually spend on be metrics watch, from that's up. the

will And Specifically, our in XX% grow. leadership. my to U.S. comments, is I us, global I We It's going that, this grow noted I it's clinic. year lot shared vet it omnichannel that sensitivity of to back business say as to to Chris, for the. That but with is today, back a what our with portfolio changing, grow. about it's Erin, would next want

drop also growing outside see to purchases. and lot shipping clinic have gotten and post-COVID, online of prescriptions a people So the as we COVID more used

and to want the online vet we in win in So overall. off-line retail

expectations -- most are channel XX% outpacing other year-to-date, E-commerce Seresto and to digit. Advantage OUS and and grew U.S. point grew I is proof and So OTC our year-to-date scripts meeting every PAT double XX%. is par points. our OUS would up

shown resilient building to but and our can results, less a that to tougher lot business, say vet these even also These And and a forward. play more times sensitive by durable again, more in and we're proof our robust we're visits, a net-net, going by competitors. are just be both market points model in durable is economic our

Christopher Schott

at period lines, year a Okay. just the stays these everything I the if was products important Great. going launching follow-up of short expansion time. of talked the know of kind assuming force. time about very But look have sales several I next blockbuster to in -- on and you've then you're And

So get again, in the blockbusters need can other? in big will like reps do example, XX kind you're approved parallel all of for a in you X about to all with year, position going think organization over be you've of each prioritizing, basically multiple with Or next adding if derm we launches these additional half once? you that these parasiticide, out got at manage second

Jeffrey Simmons

Yes.

So and force and It reasons expense note That's ramps of right sales there. us one up. some will wanted to of them. preparing we Parvo the the now I that take would in of move focus supply take front does of And got that the as we've time. is

it XX%, will be territories. might impact but force, it all sales about more think XX% of you XX% If

We right, these profile look, have we getting focus you're pacing very that. and is problems. is launches. products to key. again, But stability be detail that important, hope which we're And to on very on we're and capable. focus So But going going to

building this launch a of we're back both prepared. this. we've months and be back new we'll things it We've been other products ago that muscle rolling digital Zorbium will And iterative some the the on about. be products and on and talked sales has other process working XX these in but look, And and been way not force just

review, you As labeling, manufacturing. know, as administrative we've there's said, there's upon approval, there's

So that well. as a to there'll be pacing

we'll be very, to with ready and excellence So with competitive. very to launch going resources we the when we're and be need

for up and good the we're challenge. So question,

Todd Young

with side. over work farm together is a Chris, customers. number I'd And as independent sustainability, animal will the And on to Act incentives the thing seen That set of the only well side. Reduction team farmers launch of this as the coming being is our as being add, on be all to from Inflation on nicely credits pet up to the provide sold you've

that is about of pet will sustainability independent as So I And be of side the how progressing. said, excited the we're . really business.

Operator

comes Your Umer next ISI. line question Raffat of from the from Evercore

Umer Raffat

at in I that? curious like spectrum peak just of if a trends it seeing some seeing I'm from think comps, tier of the we're but some approaching broad you partially year-over-year softness -- penetration. hinting I'm because of asked the sort And because does some how market is curious you're XQ, look Zoetis

The other Zoetis a via since is auto ship in volume driven There low meaningful thing very is for that by switch believes them will category. also that retail. be

into curious year? So just launch how next I'm you're the broad-spectrum parasiticide approaching

Jeffrey Simmons

the to want are Look, market at and if great more still continues tie our compliance back, you key, there a step mean consumers think be to will grow, be compliance question. capable segment as door, capable capabilities. today want to the rates delivered company it's will I They going and it their Umer, things and convenience. given I we're low, to as online. any every

whole it new versus back think comes I the But probably legacy.

from You see legacy. share taken being

of the pie see bigger getting because compliance. You

lot have see differentiation, it's Credelio, a Credelio the lot of why That's You awareness. on competitors brand investment but a is our like just more other Quattro, lean done. time against it's spending us a

existing shift highlights But I of it's the our the competitive, you're some quarter-to-quarter We've Credelio coming that and dynamics. things are most think differentiated got the fundamentals, at Quattro. be going always that competitive between expectations. if we to very one so that's look And meeting got to you as these there's assets products. an portfolio we've noting. But believe of we launched we Maybe

Umer Raffat

I about talked deploying. the their promotional for know about 'XX? talking may I know as much spend just one planning things sales is Jeff, How they're I of expansion. force guys Zoetis are And clarify you you lot a

Jeffrey Simmons

that yes. question. Yes, for you Thank

and to locked call and then potential as of could be we'll, do and that course, in got guidance. material we the how be to that relative much, and head in lot we our fixed we spend promotional to finish see, differentiation noted sales the we're put color what this I more see didn't also up will in coming haven't marketplace. last my force our and what thought as of February done. launch, we time-based that's the -- the I is time day But what more We relative on see and launch the a you've earnings to think X to And

spent material, on the to faster, relative timing the launch will but a approvals. So and we adoption to is Share of be to rates faster, product in will adoption get voice, commentary, necessary capabilities increase to our ramp to that dollar promotion the second the And the promotion. to then metric. speed to share comments speed will spend what more to that be time-based XX% I and my and take is why be time able commercial the

Operator

Nathan next of from comes question Your Goldman from Sachs. the Rich line

Nathan Rich

It any in emphasis line more Jeff, been start. a there's seems top Great. than the flow how for today. longer-term is one, cash on I guess, about you're the margin change and I maybe to generation margins maybe high-level company? like there thinking on larger opportunity guess

about should next as the about into investments as how margin Todd, the of impact year? efforts then, And we inventory the OpEx you think magnitude cadence the the talked well from we kind management of that think as about

Jeffrey Simmons

turn it quickly Todd, But I'll change. Nate. here Yes. no to

with And growth, drive every employee last again, the to not year. EBITDA. start our incented versus some but earnings cash you drive #X driver Elanco we're think to versus I EBITDA plan all

it drive is to that to not way markets. better new the And in with the #X mix, price, to these but and just and drive do line top volume

care that's this contributor We do it will we forward, take and you. that's and mentioned. that the as I quarter, what EBITDA happened we turn so That And know be and of see first, Todd, I'll the to Maybe, going #X growth. to emphasis. it that

Todd Young

on expanded called XX margin We basis from margin out quarter we same points At Nate. this the gross XXX our by question, of plant. year-over-year in the for down basis Thanks the Yes. slowing gross headwinds points. time,

XXX got XXX same kind improvements, of headwind. got we've A growth. got into accelerate the price all while at to basis we've we the from those We've So sales things it margins. to inventory expect management that, points help of the reminder, productivity, time,

on and structure. So everyone's Similarly, make sure on a and we and headwind. have capturing creates investments today for we're out in team across investments, want margin anything our make people, our the calling XXXX, our that cost do going the not certainly to pushes to specifically but we're pulls

$XX that have the synergy us We behind previously. getting ERP we million called coming out about from annualization of

about XXXX or last of $XXX the million Again, Bayer and have and run EBITDA kind since now we've we'll captured X that years transaction, synergies the over done of into closing X rate. the

So again, we forward. move there but lot on, be as going of positives are a headwinds we'll managing

Nathan Rich

a feel of frame mode against where follow-up administration of sort U.S. moving. guess, you I how position you that Great. Zenrelia. differentiated? like on of I then chewable could in kind an the version guess talk yourselves I quarter, ask kind Apoquel kind can asked this maybe see you that of how they to in is Zoetis just of about reason market the product? kind positioned quick And it's guess, a launched if is of the are I I

Jeffrey Simmons

Nate. in believe we growth say globally. double-digit continue that the and Yes. and it is derm growth other we than We won't excited further in about to Yes, go continue the differentiated, market be U.S. much to to the

followed by even the robust markets and managing, very that monoclonal in others. the international on both that again, Ellen is side made And portfolio submissions we've a the

excited but derm best-in-class Kindred, continues that in from have nice came assets. assets not I'm first and So portfolio. additional only to we've a got about

differentiated launch We'll say, get continue market to on to launch. again, to differentiation is derm this this of share And to I as asset. we excited always all closer be X the us, we're as accretive with to more day and going

Operator

William comes of Brandon Vazquez Your line Blair. the question from next from

Brandon Vazquez

and EBITDA. First on kind of profitability

where not EBITDA feed in you're guide in for XXXX, increased growth. nice about not the a 'XX. Why had also committing of but quarter, you're You talking the kind to

new investments, we it's being stabilizing into reinvested have of about commercial the talk kind organization, of tailwinds, some EBITDA may organization, launches. not better ROI why these perhaps that. some like product You'll see growth, on things Maybe commercial commercial

Todd Young

Brandon. Sure,

off now, out with excited of are to actual we we into sales the called Right flows XXXX, still some the is called about to sales we QX going delivery in headwinds, EBITDA based what the QX. We out just a big have that growth. and results. dollar As currency constant pretty headwind

we The run we're last million the At a question margin. at. annualized gross regarding slowing another capacity on same an excited are $XX to rate will parvovirus again, Experior, Experior, that good the down time, exiting and plants innovation. be growth quarter million about has the driver the impact from nice continued that on growth, $XX

margin it than OptiFlex certainly replaces. gross a higher It's positive the

continuing to lot just in good earnings a call. We're on happening. a our again, update February QX business, things and of full we'll watch So really give

Brandon Vazquez

how will to take follow-up, as as Maybe well. XXXX? different, ability help your offset hinder some anyway? launches that that increases into price line plays mid-single-ish probably digits of quick year, kind comes a you're Or This kind Inflation price? of 'XX, what power of but kind the the new trend into slightly guys probably Okay. does really to Does EBITDA you have? bit. little does a product that taking down just pricing So

Todd Young

us on quarter. this Yes. Very in for certainly been good at a things. driver the good question X% year That's

year-to-date. X% least at expect We

expect to positive year We price from of portfolios continue our customers. will overall value we just to have next the

will gross line margin helpful that on and in both be profitability will overall . that XXXX. positive be the again, the So and

Operator

the of Your Barclays. from comes question next Prasad line Balaji from

Balaji Prasad

A questions back from me. is fundamentals. of This couple Probably to going Balaji.

Firstly, would shift online was have of that on retail, retail one the irreversible. thought

online? the What's on versus and decision go pet advantage owner a focus your brick to So to brick-and-mortar stores. for brick-and-mortar to a store

to your XXXX plans? of we we macro from your that, does should of thoughts this? think to price owner expect investments? increase maybe you questions on you some most. Can as mean initial in And the that's for on kind look of expanding terms incremental get Secondly, it side, of much pet the I just one we absorb And what form get what around how

Jeffrey Simmons

quick. Yes. Balaji. Thank you, Real

loyalty On just and needs, loyalty different lot side, there's there's like marketplace, and this the they shop brands also how any and to lot is retail shop. -- of a there's of where to they a segments, and there's

So what be very at depending I on would the say is nonclinic as do see commonly can country, marketplace, the purchases. XX% look you XX%, you

there. start I So

side. trend dominant just that's access, or history. that's And that see market always of I've And you It's just what the pet very of affordability on done. some kind

we're always also also that. to isn't e-com very at how we continue important. It just So build looking is can brick-and-mortar,

trends is a outgrowing highlights up of Nielsen trends probably So pick lot and the e-com channel. e-comm other the it brick-and-mortar does every

force and we a sales a and a it P&L work full continue bring dollars, retail to between it's look, affordable don't our growth see vet on retail more side. business of the business. to Net-net, does both but to pipelines So an future. products, We globalize real of with them promotional the We take from perspective, we difference big that a approach both as see more in them see as new drivers well.

diagnostics a second on for energy variations there has robustness. visits. then others. as matters question, the shifts, the been we and be And put quarter-to-quarter may be of but share vet a your Everyone step and And you will resilient has more market whole, lot That as see back.

to you're going of approach, price, you Todd forward. omnichannel here. adding growing see awareness seen able haven't said, critical you and really is -- in X% But keep to a much resilience what's price for share driving going keep seen good you we're elasticity and as have expecting to differentiated we with be much us, value, our physical keep voice brand And we availability and slowdown and up this. We've and

Operator

Your line TD from of Steve Scala next from Cowen. the question comes

Unknown Analyst

Steve. Chris big picture This is on We had question. one

to regulatory management the risk or important consumer approvals, most ahead looking something to does or what factor? view So or related as uncertainty pipeline uncertainty macro interest spending XXXX, Is it else? rates,

time GPM up guidance? updated this following a given line uncertainty, on providing EBITDA medium-term for that, is then And there

Jeffrey Simmons

come of the of it's of a always you've an in that's probably when stage. mentioned some challenges back aggregate just you're lot segments. I'd And in factors. number a risk limited We many all that like in XXXX, There's pharma, always to just companies this got all health of those, factor and I There's a competition. animal final but Yes. a making regulatory big That's know dynamic. that, absolutely regulatory, moves human of

constant got you've dollar the strong currency the some innovation And we of just some Todd then headwinds, time, macroeconomic lean existing to our this maybe we U.S. to into of to will the revenue and from say elaborate ramp. at But wants same why continue growth, challenges. the

coming locked increased retail in and side. on got market already pet retail got physical are importantly, availability stronger costs our in EU project continue We've aqua growth price our down. We've most a poultry, and that's cash will

Todd, things on So rate? any additional interest rate

Todd Young

interest XX% and cash now. interest we've for With that, we're for next rate guidance expectations fixed expense As given year. mentioned, about net we've on interest

are. up But to EBITDA stay relative the revenue that the the think about global business. to given very the probably concern continue is bigger where our feel rates I U.S. rates good a stronger of XX% to So overall, if just run flow-through Over outside interest is we we dollar

hedging. we're just flow of We don't It's do cash part the business in.

excited But risk. into with one we're innovation do be coming, the so XXXX about will Jeff things we would time, going on as that the business good what and many and So said, same longer. at the as move big

Katy Grissom

close. I'll to to you Thanks, . Great. it Jeff. send

Jeffrey Simmons

Yes.

X year a probably close, rest customers. the one on revenue is we XXXX, returned innovation; to year. the three We've a our that of focus currency company. next will momentum. as And we And over time is going the a just is growth been So constant there's into into these XXth as for decades, and at growth. And be head for to and same of historical this have as of this growth; year two couple constants; us XXth charge year,

as New company. innovation growing a is progressing. We're

but manageable. our but net Our as been the costs yes, are best volatile, EBITDA up. have up, stand-up highlighted, maybe are has come And And capital Todd down, leverage as leadership ever. goes goes markets they've working capabilities we the and

way a with and the you XXXX. about excited as We set with over Elanco. that also as locked that durable to company forward. -- into seeing in we XX% your going a set of up ourselves to at highlight interest February industry Look and we and position can again pursue well believe growing see debt Thank we've the durable continue JPMorgan we're in that and late our up, XXXX and in you we all for investment our opportunity forward XXXX through for

Operator

call. you Thank disconnect. participation, conference today's now concludes for may and your you This

Elanco Animal Health (ELAN) 7 Nov 232023 Q3 Earnings call transcript