Elanco Animal Health (ELAN) 7 May 202020 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Elanco Animal Health Q1 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

to conference like speaker to now Mr. today, would hand over the your I Greffet. Jim ahead. go please Sir,

Good morning. Jim for XXXX Investor Thank you earnings Health’s Elanco Relations. call. QX Animal I am Greffet, of joining Head us for

me President Chief our Chief Officer; Executive Jeff from Grissom our and and Young, on Katy today’s Todd Investor Joining are Financial Simmons, call Officer; Relations.

anticipate statements based current expectations. During forward-looking this on and conference making projections call, we our

slide differ could XX-Q including materially due and number our a in factors, on Securities filed and and results to those Exchange of latest listed Commission. actual two the XX-K outlined those Our Forms with

for The benefit decisions. our of information intended products the community. investment is sufficient It’s not for and about prescribing we the promotional to and provide be pipeline not is

the non-GAAP find also referenced we'll measures an take slides our call, and elanco.com. release, happy be the workbook release discuss your and remarks, today's press After can to questions. about this financial press investor information our on on prepared The call. we that will during further slides contain You

This usual. are introductory comments longer than morning, our

to prepared are a ensure call the everyone who we So, has we speak question. to to extend

to let call that the over to the With turn highlights. Jeff me provide

every Elanco, COVID-XX. are These unprecedented Jim. morning all by impacted prayers, to Good those our Thanks everyone. and let by thoughts, times one and offering truly begin from at me well wishes

healthy. of for the of providing our availability the keeping gratitude our all express working and includes to and to those disease, in pets afflicted, and also supply farmers maintain caring battling essential We life This our frontlines needs the the food us. for of the veterinarians this

available are veterinarians. my of I'd to medicines like farmers, and who thank owners, ensure pet colleagues to working to personally diligently Elanco all remain

than food As you relevant purpose-driven this never vision vision know, has is guided companionship been of company, more last a the couple reaching our and and life, months. by Elanco

functions to operating customers, rules plants and our and animal measures. others continue research regulators, implemented and appropriate personal by are having remotely designated safety our and as social engagement labs serve abiding health industry other our with investors, essential, working the Employees company manufacturing virtual customers, With stakeholders. maintaining all distancing

beginning are place appropriate. measures where to return in put site We phased to

help. in We're Elanco to with formed leaders also challenges doing we their outbreak. from and look Foundation where Elanco Elanco Foundation XXXX to to providing security ways their help communities food the rising are financial Foundation collaborating fight the part. will brought for and operate, Elanco continue and by on and this support more

and clinic our from and Food We're and pandemic customers impacting The the at feel of logistics, to the both our to watching and leading and industry, have markets. COVID-XX pressures virus discuss indicators I'll declining April our revenue lives pressures May are the the of in Animal Animal protein end and second the in began continued half March, and impacts ensuing in Companion into vet visits and this carefully more the and detail production call.

actions that with COVID-XX and the QX, prompted shown pandemic liquidity, commercial take thus on the four. our partner's particularly has on pandemic working distribution in and has as Elanco slide to us effect impacted them

inventory provide and discrete liquidity our and capital direct and working also these approach. distributors, The first a changes in of event we This our prompting they decline for amount created significant unprecedented in I in distribution more demand customer created and is of were will commercial The our hold. tipping actions. the pandemic summarize revenue point a reductions in the executing result COVID then pressures QX uncertainty near-term on details.

of monthly and from end we to to targets them. customer I a personally our Companion four U.S. start eight meeting distributors at generate also of demand. each with for established the consolidated Recall specific XXXX, instituted we Animal them review

and delivery on distributor performance across distributors. clinic a promotional are evaluation of across Based range valuable new is own, distributors' placements providing our we've activities. across is services, individual our effective to vet especially generate of mix less than demand and our Distributors seen and both a But that in much our clinic ability the servicing home business, critical capabilities, other accounts, this conclusion products. logistics, support generating for

As held to creation in product seeing directly environment. by we impacting increasing, the demand distributors Furthermore, ability impact the Elanco was volume being were create was today's demand. distributors of less not by their

and pandemic impacted from change our sight shift The distributor experience. the a also historical an is COVID This our consolidation. inventory from

inventory the increase pressure inventory liquidity capital larger tightly. from handle remaining their are distributors four and drawdown going their their the We distributors need the the eliminated through would and working more volume inventory COVID, to expected managing distributors. a levels offsetting to operations, With

Consequently, quarter to second reduce distributor in XXX space Companion apply mainly U.S. these business Animal the mainly million million additional in new in our product expect of XX the QX, by further as to approximately tactics geographies. we and reduce across amount the in XX inventory million we we and and

took priority our our evaluation as was The distributors U.S. primary operations for of last responsibility I a December.

Elanco's capabilities and drive confident demand, omnichannel. continue launches, of With well to the leadership changes by product create in excited broader the actions full acquisition. insights and execution the I'm the Bayer as I'm creation, in as gained utilization on demand the that and commercial into upcoming we'll the industry-leading distributors' close

this an our COVID change where important into sales. commercial change and In and impacts our gained important in cash of investments control, is the our this near-term, execution. our reported that we're flow, We've decision capital, adjusting working and capabilities end that This tactical pandemic March own trigger at tactics. negatively however, are accordingly. accelerated the improve confident insight We're QX. our this was of modification the level superior will a And

Animal how following; of maintain we're our of let entrance, priority demand clinic portfolios. with clinics our the This in clinic; how facilitate nodes owners. with have over that the now. the had do a brand market products equation and competitive flow We have chain we new XXXX. With as commentary and been as of Companion started we increasing ensure awareness or grew end business has distributors. the at generics important strategy and expanding in of inventory worked through we in introduced ensure face supply dynamics; their safety successfully when to new other we built that pet multiple both established share, steadily positioning and of strong our and And to distribution stock new the buy/sell only created years part summary provide Elanco products, placements, promotional efforts; in structure arrangements an Manufacturers with we a worked me on past additional changing distributors variety with the

been We've the the for importance of their assumed the promotional basic but been evolving structures, and inventory arrangements, has efforts of XX years. unchanged including value

were we've customers' dealt concluded capabilities and that internal inventory liquidity as challenges the the with built our we by to However, dug in COVID; data partners, into and deliverables we our our needed levels. with promotional clear distribution triggered for change accelerate

As enables have now, distribution I focus to expanded scope plays valuable we're more portfolio are also there channels. The do a since value Bayer to moving and role hybrid acquisition and we this efforts. planed us where will areas mentioned, targeted across approaches to

capabilities now. structure the have we use the to use also will arrangements We beyond buy/sell

reported Prevention inventory in our and disease sales well. of as Therapeutic efforts Companion The majority in space the our where are categories, The animal adjustments Animal made QX these we've the Companion are and Animal in decreases direct food Animal channel categories the result of Companion the adjustments.

QX more this expect in US began of COVID second quarter decreases impacting animal our portion our food We plants processing in as closing. business across the business as the began

our optimize commercial approach, products strengthen our will and activities drive investment changes position, to our over enable direct demand us promotional run. long These the that for into

in and innovation, change our portfolio, in distribution and XXXX, our fit productivity but have and one-time the first of immediate with impact half negative partners priorities impact actions commercial and These tactics competitiveness. productivity This our price largely positive into will resulting on our directly broader strategy. occur

Elanco change And I'm trends products capabilities to underlying leveraging know of this organization. I positive purely willing already the tactics result as competitiveness, sales see in as throughout that very in the because a and the approach XXXX marketing in important value business commercial well in targeted are and to make also beyond

that demand the a will will material play enabling creation priority distribution become are highlight own role. examples why Elanco's Here targeted and some

the channels, or in alternative outbound clinics sales call the sales foremost, past we continued quarter. U.S., and the our First of been or vet into growing Companion that year have in products mid-single-digits first EDI over Animal the and the in

gaining with is the a example is outgrowing acquisition. is outside market growth and trend Bayer betting in QX especially channels, overall alternative on, channels In in QX. the of been a great these the This nearly Elanco share XX%. we've Elanco that the vet

solid was anticipated when we and even are transaction. double-digit seeing Bayer the same execution QX. the market through We with The growth positive trend faster than with evolve assembling Bayer demonstrated

had despite to contract in manufacturing generic negative say rumensin And flat slightly Our to EDI with our I of challenges partner, U.S. the Food is a business Animal maximize the generic sales related can rumensin. the the and the of the sterile working. Paylean, supply inconsistency a launch that trade strategy is U.S. sales against

and even in the agenda, challenging areas control directly a we our be for cost actions And continue price that productivity positive, to QX. facing

Credelio other new QX from average. obtains tick market category Kinetic, canine, XX% puppy starts, nearly the data growth market In sales all X% from also encouraging. exceeded third-party and Credelio is provider in External brands. of a nearly penetration flea double

patient significantly order the is capture lifetime of New value our pet. to of part strategy acquisition a in critical the

new worms of Relative current continues can efforts, patients. to Plus strong growth the the year, even in see of their penetration, that over benefits Interceptor the with the increased against has marketing last our through growth face XX% pets of exposed Plus in be coverage comprehensive environment. highlighting number in to to Interceptor competition,

second inset osteoarthritis is clinics Galliprant, on shelf, where recommended in used the And first in dogs. or is most pain product as the the increasingly for

the China, a is on which of our their some drag pressures swine customers, tracking even significant our year, environmental ahead expectations corporate showing last are among of was Finally, in signs and herds recovery industry large QX. abating.

protein line business though but when beyond year and with challenges continue strategy. aware Moreover, in did our -- international poultry I our is that not business the this durable lead future innovation, current strong results been a pandemic and category. our vaccine this brands, quarterly started we noisy, with we year, health even am aqua unique and IPP noise behind business have to and and execution, the expect presents

a move pandemic. productivity, channel commercial while our a The is increasing structural inventory strengthens it and distribution control, our change and growth partners potential. our COVID-XX our proven reduction with brought our capability by ultimately, on was in But

review to acquisition. So, Health slide now Animal Bayer the our progress transition and five and strategy on let's IPP

the continuing geographic make We to for Galliprant We launched the continue for on in of Animal that in and progress product. We expansion strategy. approvals Companion all our in of markets Galliprant QX gained Australia elements Japan. Brazil key

the Social dynamic Animal the larger are channels in This driving alternative omnichannel presence through acquisition, a which with Companion increased will our validates sales give much the channels. strategy distancing Bayer us in measures alternative primarily U.S.

April. illustration, Advantage the Bayer Health in QX U.S. showing posted earnings with Animal XX.X%, sales products strongest in their growth XX% both As gains XX% grew grew an and in the Seresto

favorable these a demand year benefit and While the -- underlying U.S., in is purchasing comparison growth the benefited pandemic-related strong. from prior

use to the is mediums a team, leadership across connection we bigger owners from access veterinarians platform. combination veterinarians pet distribution, multiple from between industry come targeted Telemedicine agenda a sales the to announced and and Bayer. part both our will collaboration provide of that telesales, a platforms leading and to with Elanco omnichannel Additionally, of VetNow and telemedicine of an enable

cost In and our productivity track on is our agenda, throughout activities facing delivering. anchored in manufacturing

the productivity discuss the in were quarter. Our later. gross Todd a will in more margin overall efforts detail benefit to margin

even We distancing close. company the in Finally, Bayer acquisition previous standup recently antitrust Africa, towards the continues on working approvals track, development independent to in Turkey. to with arrangements. clearances received remains addition Ukraine, and remote and Columbia, and South progress China, ERP The the social Vietnam and mid-year in

make to of we submitted constructive Commission. pre-notification the decision. After discussions, XXth, to have European April until now June several They a forms Xth on months

authority purchasing and their [Indiscernible] accepted towards event [ph] filing close. The This is review. has Detra positive who U.K. the competition markets from merger is commence another

making the And system Tata We're activities personnel external All the for place. Elanco and including day to one progress Services. of the in on new activities, significant integration financing the Bayer in out Consulting are the from Bayer, preparation we preparations Despite as remotely, making integration executive capture work Elanco, of elements synergies. hires. for at are all including the need the SAP teams as announced acquisition to well and build progress team,

organization the Executive new dividing markets capabilities expanding U.S. and the to combined markets. changes closes. organization pet commercial Committee animal. in of We're of leaders farm maximize We've all when value channels, structured a to team also U.S. include and portfolio, and with the help, of Europe We're and Bayer emerging focused our acquisition international these effective our the on international leaders in become

a focus greater and adding give been connection and chemistry Chief we're on Marketing expertise, the a Finally, now brands continued leadership to pet veterinarians, changes delivery, deep that's their These proven producers. bring and IPO. Officer to established since owners, us

landscape, focus models on It go also customer. priorities. areas experience, the and four in on closer Bayer, more packaged operate flatter consumer market product different good Animal competitive external market to in us Increased substantially is Elanco, of Health, tenure gives on the and marketing team, that diversity a a deeper the and and executive animal structure that health commercial dedicated agile expertise to execution

our each the value one, enter positive lead named is to more place create will we era by teams businesses across and All marketing multiple executives next and launching accelerate intent these capabilities to of and channels of grow products. their that with as a in combined have initial capture It increased transition. day

to opportunity an that team closes. from within after the combined leadership have plan host day during to transaction time investor Bayer will the our hear You appropriate an we

clearly, an by summarize, commercial impacted sales to Let the our me effect its quarter triggering change. COVID in are and important accelerate

and the the am am of are our look the for making products, future. strategy I Elanco beyond the on positive we event, they commercial on positioning -- As moves this our positive I the value

changes there. on track as closer also sustains that to have our and move to made execution ensure We mid-year our remains intensity we projected a

to turn to results more Todd the our over Now, color and I'll provide call on outlook.

six to to the the describes considered our presentation focus provide Slide the in trends GAAP appendix our business. GAAP measures in Jeff. of Slide of results the items arrive to into provide a XX On XX I'll on our slide adjusted presentation, underlying the results. adjusted our made insights financials. Thanks summarizes comments to the in at seven summary my adjusted adjustments

quarter refer description first today's changes release in please the our a to gap press year-on-your of earnings for detailed results. So

decreased eight, and Looking you'll Elanco the revenue X%. currency at core Elanco slide the adjusted measures Elanco see in decreased constant basis, total On quarter. revenue on a XX% total both revenue

of price. as to driven was from product gains as larger year category by compared Gross with by of is geographic and XX.X%. coming a international This as from productivity decline foreign percent margin and revenue a partially mix, offset animal headwind and A portion positive the quarter sales a negative products, markets continued first impact well last exchange. of lower margin food

costs including track benefit Our of a ahead on compensation productivity and remain area in efforts quality certain our expectations and reduction are and areas. in manufacturing in

throughout flat from offset expense by the at organization, management the XXXX. the first million standalone decline selling strong expense expense was and QX reflecting illustrated incremental investments sequential Operating capabilities $X in increased X% administrative $XXX quarter, by and marketing, million, as

X% of reflecting million required businesses, Prevtec. R&D cost XX% revenue, $XX.X expense to or and additional Aratana increased

just and expenses EBITDA Operating of XX% the reflecting the $XX.X is income XX.X%. income tax QX of XX.X%. At to declined sales, XX%, margin described. impact million adjusted adjusted operating The with gross rate effective net an margin bottom-line, decreased I

and rate growth. core volume a overall, and headwind effect Moving a while declined of foreign look was X% The exchange of rates effect XX%. price on take the to price, grew volume let's slide X% at nine, revenue revenue

our four of the you the slide, breakdown see categories. revenue On can across

currency I growth. will constant focus on

Companion XX% our volume disease from the prevention of decisions, therapeutics the Animal You increase particularly X% declining XX% offset recent from and categories, decline with in price XX%, impact described, Jeff the can of volume. see by two all and of in this

we As the bed at the outside noted products the for last in grow rate, the office U.S. the U.S. animal weeks slowdown in channels underlying also alternative companion demand digit single the the despite In EDI outgrew to of and two the demand quarter. market the continue

as the driven this Future in Food Growth revenue Health, our from & poultry in small potential some grew and supply and direct both disruptions. from of aqua, well underlying was a pandemic ensure another but of portfolio price. demand, international category to volume reflecting continuity Animal vaccines X% of strong quarter, anticipatory XX% amount Turning customers markets by Protein primarily X% export as COVID-XX continued to buying, in

and decline manufacturer, Ruminants & a the quarter mentioned is headwinds some Swine for decrease in continued failing, revenues increase injectables in it reductions by from in our price. X% contract known in driven The resupply and X% of and sterile channel decrease X% inventory. volume from

from encouraging offset and from demand some and coming export poultry. customers China fever swine in from encouraging. the were clients recovery international by buying markets The market is see as in particularly we anticipatory African These China swine earlier

in assets XX% contract the of Revenue growth and out consistent manufacturing the only This quarter, for activities production decrease those with category wind decrease two from are the human is and the we strategic call the activities. vaccine this Lilly. in hormone of expected for these BI continued the

XX, U.S. slide performance on and internationally. can in you our overall the see On detail

buying international and XX% encouraged quarter, business by the national business business by core U.S. Our we declined this our quarter, the the anticipatory Well, growth X% was aided stabilization the business in in grew revenues Food while the in Animal business their

the and loan balance form at a that between acquisition our financing term loan commitment. the the after and debt. ended closing, the of term QX flow This cash XX. quarter that paying We've our find with $XXX sheet of also our down Bayer priced shown X.XXX of we'll on on debt slide we’ve equivalents and the sheet on added billion as sheet in X.X balance cash B million billion additional B for cash are We balance

acquisition. a available have After also the the of transaction, million will We have we $XXX Bayer capital sufficient to us. closing to finalize revolver

Now of Animal XXXX. to our of COVID-XX, Food restrictions, providing be performance outlook, markets Companion not parameters guidance our in business surrounding of financial our and will tightening both for a with and of distancing moving remainder are protein social developments uncertainty distribution continued function we The our the Animal with partners.

As capabilities estimate our going million the million $XX levels reminder, the as a additional must model was retail Jeff $XXX Also, given us approach. in their bring inventory of quarter direct channel we desired forward. for inventory new second channel to and to stocking carries Bayer mentioned,

capital We appropriate, are delays spent, also of assessment travel. actively and managing and maintenance savings including evaluation open external reduced critical careful our in where flow, expenses cash operating of positions

to continue efforts, will term We as innovation well these success. to our invest stand as and integration in up long are as fundamental

turn move back Let's XX to things to summarize. to and Jeff slide

Thanks, Todd.

start COVID-XX variables, as in companion the our key life of restrictions. to indicators face on are pandemic of like watching elective well our early vet of in cycles. Credelio, and our our ability resumption Nocita navigate as addressing interaction animals by me their person the Let Galliprant, Entyce, sales and we're visits the reps industry are impact return And leading we business. social the as the distancing easing The with to Products of on customers.

sales important So patient are growth. continued new promotion starts and for

and our offset delivered strategy. are meantime, vaccines clinic. of In channel in omnichannel a is products confirmation a positive the alternative vet growth the for of sales exclusively many Likewise, the

rebound half As the declines the in a a we're shown of U.S., has encouraged prior clinic visits vet weeks. improvements after sharp leading latter indicator, where the primarily and by April in

clinics on to the in the vaccines sales we're growth Interceptor pet wellness as VDI due you're Plus, into From But Vaccine encouraged and for rebound year-on-year Galliprant a and optimistic show visits. owners reduction by alternative decline that Elanco clinics. show in we're to returned for the your channels vet Entyce. April Credelio, April

longer project to is to have and business a Animal may Food more return difficult normal. to The tail ultimately

impacting although are three animal positive across near for customers the In monitoring may and long-term supporting animal On protein we're see we industry. species. persist, shifting down our term, the food of trade main consumption this front, demand consumer factors durability the

plants that First, shifts across species on at foodservice chain. having impact supply and processing broader retail absenteeism, can in COVID-XX capacity, demand the to plant reduced and from shutdowns is

customers headwinds less third, poultry. cattle, practices capacity trade species the consumer from and But with of And and the main and variables. demand our and producers offline, face will In factors severity These all of swine impact cost impact with the and down determine foodservice significant our supply economic to and general, three swine carbs. species lower the the likely across the challenge was industry. processing our of the to unpredictable return impact proteins flexibility cattle production

perhaps having chain. outputs the as are to to have most the to in make timelines are animals producers their a foodservice flexibility decisions from Dairy Swine little production difficult inability retail. in supply and given producers challenge back up the shift

uncertainty. shorter pasture most pivot poultry more chains as situation lifespans, players can easily. able capacity issues more And and create buffer, a use the is output Beef while that are to finally, integrated given supply in flexible

impact Elanco in For will predictability. producer all impact of until It But to the is species, the reductions about compressed level and general, headwind in animal products depends our timelines business. on be to profitability difficult several the talk a there recovery is to variables. numbers or

Until producers anticipate can returns so our capacity We uncertainty processing decisions. that for continued informed customers. make plant

more coming customers animals important such We productive critical even our these over supply. to when variables Healthy are with unique work safe, will affordable a Elanco role. plays face markets, weeks consumers and reliable a monitor support and and food the and

are the of let confident about But overall. So, for of close. this acquisition me circumstances And year. confidence These long-term society our to we're in durability later industry even the value medium industry we and Health this for health more and summary, continue Bayer and in strategy. and animal challenging Animal the have

and challenges these are medium endure will the long-term. taking for stronger we and to make actions We us

management, with scenarios the of impact advisors our external We and senior testing business. analyzing our are on stress Board range a

we're various not this of time. navigate contingency and degrees quantifying possibilities. to have We demand headwinds the plans freedom at to But

and the our move year. We depth and size the companion food business, duration throughout animals monitor we both COVID-XX to will the of the continue the as of on pandemic

to inventory year Despite factors, results. the with a that channel full company. we the stronger as emerge provide have foundation headwinds reductions along confident this, these we're this in will to from our time We anticipate

even to excited ahead, the be in Looking about. mid-term, there's much

pipeline, strong through have We the of potentially XXXX. five end with a launches

We have differentiated market valuable portfolio products the that are of a on growing.

grow scale, and us faster will global And expertise agenda that win presence has enable productivity a Bayer sales. market income dynamic Our operating market. channel building company to we're to a in than with

And finally, this is I in. a believe that company Elanco

of You the of team but good you see a all of during adversity. during and the some resilience times determination challenge character and times, and character see

The Elanco team is executing at a level I could not have imagined.

Our clear on and essential are wins are track.

commercial our plan. is markets. proud and growing acquisition mid-year team. the milestones. key for company key company our in to First, and is I'm Two, up delivering teams Bayer the are products competitiveness this of key and growing independent stand The close, our on set a

Jim the Now, Q&A. will moderate

Jeff. Thanks,

as you're as the question, extend start I ready needed questions as to with time two to mentioned. we're questions one Laura, possible and callers limit many parts. Let's first with Please we'll if a take available. your single from as or question

Ryskin Instructions] sir. Yes, Michael of of comes Bank America. [Operator Our question from first

pressures Thanks I and much about this gradually asking was in some COVID COVID changes guys. you given something versus a in just related to update. off unrelated Could how bit made by you business moving of the change that Hi. you're little the anyway the clarify of expedited? XXXX, distributor distributors tied want on to related to start

much coming how a just as direct hold of take the down year? before the step sort especially back after that, of drawdown into Thanks, especially road, there the XQ, inventory part the And distributors the move into will second risk fully Bayer later and expected going so a the numbers in the for this read the -- drawdown

for the you thank Michael, question.

this front stated very is comments believe decision change, it we right But me did that the XXXX. we in it's let the his clear and timing. right Todd when started So not up as anticipate be we right

challenges a a created decision for I really As our is to catalyst it And was it did was distributor did long-term. cap let -- the highlight to strategic what that And what this. intended COVID me partners. two COVID is this mentioned,

or near issues for to continued enable it had that and years user about and end issues also customers. liquidity that did demand capital First, working the capital not existing working had the concern they we've strategy XX a continue, with their term

So was catalyst. that the

and I that business through to again, as tracking I plans want we like again, even through and to looking our organic first see underlying discussions start demand, at the Michael, and I emphasize original mentioned. end And quarter mentioned, these constantly our as we and always overall April. EDI

that that So want to I emphasize.

To going your let a highlight there, there second me are go you as question, we as look things forward, forward. few

First demand. that the to importantly change, with of see end all, we to closer going we're be very user this

as We'll have move less partners, one over to them expertise. you've we each eight four we and done brings here, from different seen as time, what have of really distributors,

demand, more now we’ll course we'll of matching month-to-month tighter looking we're they're and efficient demand. more and partners, less to will terms user tightened have of tightening much at mentioned. is will that be be We be closer efficient. Things at is as doing have what end we're And and lowering inventory. that more And we'll we look

alternative as keeps much we their will especially less mentioned, then given really omni-channel And to Bayer approach And with strategy, Bayer. inventory, with go-to-market channels. again, and Todd evolve move

with is through the of Michael, than more at after to add, this will end this Todd. destocking, QX One than be getting XX% XXXX. we thing it lower were

do going think structurally this we forward. have So set we'll up

next question? Laura, take can the we

Nathan from Sachs. of is question next Rich Goldman Our

to within of on kind investments reliance Jeff, kind decrease Thank relative And your four positioned products, Great. that partners? on I do you. that needs guess up you you channel? of favorably see the that, make competitors any Good following do your distribution of to just distribution ensure how are kind traditional you organization morning, the

Yeah.

Nathan. question, great So,

time And is, the well platforms. and and they highlight example. me actively see is to So role. been They that the would customers through can convenience let highlighted, we we we see playing we I've And of received no a can overnight, a beginning. key logistics, I question mean, collect, look very involved very to get I spent as what in the them income as shopping, from online XX% and XX% this of of the their as what of lot collections I've at continue way XX% there's distributors doing distributors one-stop product our an ability say

continued animals. distributors services specifically And on talking you platforms. we've varying can to There's delivery then see know, differences and these with that more great four about value companion U.S. a And do. them I'm in as value home

the So especially they us. Nathan demand clearly as enable it is I found we penetration. when important, drove the this and help us But will continue we to think new demand came clinic and what creation, to really primary very creation,

so doing we're we our have we're Interceptor really worm, pain, led by can which targeted demand do have is in do these our for campaigns we Credelio what as best, direct is Galliprant on appropriate to campaign investment what distributor the by and what we we only relationships, feel with is growth -- just create and customer and creation team, and significant partners. with to with these So and movement value pay seeing products Plus we

demand more much So we a less after new of in really having to brand in where factor key moving this control. see driving was and years much being our XX this I good to factor that feel and our awareness, creation approach is very a inventory demand

Lauren, next question.

is next of Barclays. Balaji Our question Prasad from

questions. my taking for Thanks morning. Good

Just a couple of quick questions.

had outlook April, for term on longer can and pet about near speak you trending? you pet you your volumes in clinics, term on that we the Firstly, how that elaborate volume see more mentioned recovery had and some seen

volume telemedicine dynamics? mean seeing draw option comments Thanks. the quick are VetNow, you on maybe a the better what with trends and some this collaboration industry term for longer what also could And it and just long-term? does growth your on means one for if And

Yes, for question. thank you the

as the the and animal watching of COVID the we again, companion revenue. that business, specifically office looking Vet we're course, look what at, impact is at traffic, So on metrics Vet we're visit

through sales We EDI also of that's And this an channel alternative the we clinics. navigate on demand at are as change, then keeping looking or shift especially ultimately, the pull clinic. the occurring outside eye

actually growth showing two and March, traffic and multiple social mentioned, is is traffic, seen from prior actual last April, quarter country. weeks restrictions and of what here that's been highlighted of the were other across sources, pickup we've implemented both and As has have continued forums, into two distancing weeks in last were what the to seen as we a the of the and in revenue

our I recovering behind the again, mean, most impacted. heavily though wellness are I been visits. think they they've trailing but

when Galliprant, our we surgical most look our around we at as very nicely. wellness. sticky brands plus is We That's XX% about pain the business, So our and But been franchise, our over growing which portfolio, been growing our Credelio, suicide interceptor around and what's channels, impacted our vaccine XX%. portfolio. we see prepare of see alternative has mentioned

we key right third of even that is see VetNow, is, to early as a telemedicine. our veterinarians owners then, shop. owner and owners And to to that move again to enable not pet time and the of have than know even being connect more do Vet we are of is enable they the veterinarians to strategy a want more was may strategy expand more what visiting over able a use we high and part that clinic. change impact. where the to pet and bigger owner allow It's a And to briefly, able will to as of how pet to to Bayer that much part pet you look easily shop say be linked too tools What know that more reach at now portfolios to to just we're a collaboration again, as working

question? take next Great. Laura, can we the

next is of Suisse. question Credit Wright Our from Erin

Hi.

front, dedicated did to the with efforts R&D generating five blockbuster's be I want for does be revenue here continue On products you? Will And it these next year. you to like any of follow-up. innovation to sound the

requiring Nathan's should was cut anticipate capabilities dynamics the about sales Do we out you as you in up question. stepped your investments it think I deemphasize profit And how own net distributors distribution? here? third-party Thanks. you internal as think

projects equivalence. here Look moved give I Yes. the window about IPO talked development Aaron very during the stage an Again, have development what We've late late as stage of clearly, time. evolution done projects actually want launch as out at we just we pipeline. to kind coming to of of this those of

And more we'll so we're this XX have more that so then have XX now the and products we view between are time XXXX. So launch we've far Elanco about products. from get and between from adding point we And view five as now have as launch closer at in these will Bayer, XXXX. from probabilized we but talked, that and

what highlighted now we is of today And XXXX. we the and see them five of between coming end

believe next some the blockbuster, in first between will a soon. the believe and here do have blockbusters. of of of have starting out or do we They a Relative created, do the some that be all innovation criteria to companion that, differentiated we you. and see to we yes, these that food constant we Thank believe the coming size we best-in-class. And animal. So the is threshold given of merits flow animal year innovation do first-in-class that do the really be mix now

see the to We distributors. better do from expect value

again, you put number changes Vet margin we've result and have home reducing and good a respect we've years the in at change them to been reps with position keeping With continuing front of a this and reach us that frequency capabilities, to COVID seeing a with as clinics. been on As certainly know, ourselves with better certainly them. impact, over will

look drive move Commercial to forward. as where that'll has forward forward. augment will obviously, going acquisition that there And so well new an best to Bayer But, in look leadership as demand, the the portfolio to our as as way good we team made. throw own and adjustments our driving clinic our to growth we're been placement continuing we evaluation are then be we some U.S. our And investments and of continue be at on internal those confident

question. we the can Laura, go next

sir. Yes,

from with Our next question is Blair. Kreger William John

This the the consider? Hi, will plays So clarity business some you're think are terms you thinking know of you you on you're in how You Krieger. is if think your XXXX quarter, I the need the there Or to us market? good [Indiscernible] but whole we the that factors of about can other out? for guide, how Bayer year? morning. inventory exclude year not rest do next a reduction give follow the providing of trajectory

get as noted, trying that. the the to everyone timelines there's pieces respect respect with moving and with is a John, And we've lot of to for best Yeah, feel to COVID. evaluate

in said, the prepared remarks, one animal we're Jeff definitely as which think, is food the I keeping eyes on.

new the expect not I the full capacity to but be end swine Falls didn't a was or morning, facility opening this until think Smithfield a a but swine back up it month. of opening in new, Sioux up

spend economics, to a well as our teams food, headcount. continue business. processing as lot animal the on they're time But uncertainties how We and with to understand there's seeing of certainly, there, especially producer

we we out do pre-COVID, negative while So, expectations that to on be relative as guidance called back March. in to our and business we've expect pulled

about guidance pre-COVID back clearly, on the as silver Jeff On an side, tick the going impact brought dollar wait of but portfolio in plays and given original on And then clinic the places, morning. Vet we million the did FX, as we states, poll this continues up had there. that in of certainly more levels the Euro about is bill the we the our other other XX% used some said, changing do not to Vet is out but assumptions, in That can to we we're it's issues April, said, $XX here March number you on obviously, slowly strength in clinic. only has impact, have Vet be back traffic see it's

So to headwind. that be that of continues level

the inventory expect or overall items business in continue significant headwinds business to XXXX. do the be we to in So

at and and wanted U.S., distribution. positioned April immediate that holding enables But doing has that's when results, to in rumensin we've the nice the lane animal more market the until X%. well the companion through animal declining in and X% to need international even share, our on, highlight saw with we you change and to so by key seen you say we this situation. pick to data I competitiveness OUS, the of growth, would that to feel growing moves, flat the products look the competitiveness as I terms driven pay with our in john just again, food even And to well reiterate, up grow U.S. relative in It mid-single-digit, net why --

So our on our feel the good that. very we are marketplace, about competitiveness eyes and in

Ekaterina proceed? is Laura, next question can we of Vasilenko Our JPMorgan. from

taking Thank Ekaterina for is questions. This you our Chris. for on

how distributors And going inventories of into strengthens kind one and more unusually high this were your actually So on levels the changes heading of highlighted distributor you've XQ. forward. then position

change was kind not now, why of why wondering earlier? why the just So structure

Yeah, great, question. great

look over with three animal or at really actually since season time quarter approach in head. and the So, animals companion over that sell product over this been our distributors campaigns our distribution franchise it's XX with a our the process, let this very over me disciplined the -- And let criteria over are dollar business, the built in that place we've billion be we looked trailing things in product. partners. that and that's with you so buy the varied years XX buy, consistently, demand, know, time. every companion And on clear day, upcoming years. distributors, the things again, And our been me have the similar represent we've where highlight, We starting three at just very

that's So, been important.

would Now, one, over has them. between have differences factors more our There's as time that I network distribution changed say become concentrated. varying

move unable expected do and to But that this to our and towards continue about clinic an this not started of number we beginning working terms concern COVID tightening the tightening capital was as the they do to mentioned, this. in And and we in to distributors, evolution this So, drove capital of were something was so the really we working distributors. year.

actually creation enable placements, believe fewer more so added today's brands as as letting been us but see space, you've we've is us to shelf launching, so to this what us I bear. help do et interceptor our seen, with and we build value the assessing, of and while we even over and we've and will do are And distributor and we've brand cetera. that Credelio, new Trifazis, share continue this has building as optimizing, Inventory very And and drop of and build build now optimize. that new placements, mentioned, clinic years, capabilities even we allows it's the mind, helped effective do been best. been shipping, service, create We demand plus

feel to We've pandemic. been me, assessing we was the timings but the right. COVID tipping the So, point this,

distribution partners COVID well and the may and of the just that but didn't on distributors add that tightening of as would that play kept, they efficiency the we of to future remaining the just thing obviously, That One of inventory, the assume two expectations made district's element pain out, inventory as as down same animal ate tactical own the amount demand. to some the before. also assumption Ekaterina, we've of need there's

clinic Obviously, we're based traffic on uncertain that depending but you're have dropped in really at. what looking March, XX%, on XX% to data

-- even bad So, triggered? that that turned out impact worse was with a assumption our that the COVID getting be element to on timing part

Laura, next question.

Our James. next question is Elliot from of Wilbur Raymond

to some the U.S. their by Thank in operating the could much guys sure how XXXX. the is disclose for growth do of much this This outperformance region. a sustainable? think Lee up, that not you. first especially you comment was much quarter increase for one business, for remainder of the as follow But on on sure I'm not advantage throughout how of you some this and animal time, to see quarter? And possible but Lucas color in Is guys trending the was already. and which stockpiling of to best family, you flow thanks. if buyers' quarter And appeared what result provide due I'm you be Hi, how their the Elliot. was is COVID-XX it boosted you product related do cash how

operating Sure, the let flow. cash me address

flow X you stocking, the million. inventory timing tomorrow. on view the impact go do the certainly We better that our XXXX. P&L us from swapped for to a positive didn't when in but In of This working our XXXX collections, early you'll start given was is XX-Q as the we'd filing for here today, operating is cash that a was see well positive we really quarter function robots will something -- will that improvement, see in a capital of be like,

fact we're well on cash charge, The that both up other as in item restructuring about operating our GAAP impacting integration as making was flow on door. investments million, would $XX stand as that's cash which the of of a the results see in in of you with the bear again, is out the lot the

cash will So we're the be in despite the challenges. again, again, overall bear challenges on positive very QX decline operating cash and Q, as given transaction. But the additional going under flow in of QX. timing focused into sales liquidity the

We but as the with we are this set very just it debt times, challenging that commitments on looking and appropriate. we're fine available as bear funds again, results. top the well cash the handle Jeff close have. of to is much mid-year But I'll where overall, let

Elliot. Yes,

remain saying will so all, yes, of linkage XX% you but start deal and competitors was grow did that the, quarter our of say would then know, the color to I last closes, the compared XX.X%. year, up overall again, XX%, until the first revenue to first given advantage we diligence, rest by So, I

and pandemic strong benefit results continues from related, and be these underlying overall did to very outgrow the continues year the demand favorable to prior While comparison, purchasing some market.

leaders linkage capabilities in our years also, three channel. we've year in and alternative channel, key of direct over we've a learned XX in our that a to start three that they past. alternative business. They this think do I this the the had there's some diligence the and head communicated down have in findings They're moving the

definite key alternative we You think our expertise mid-year and channel move in assumption as players need to and a close with able the how to this omnichannel to again the people these and are critical and be validating flow, we approaches partnerships contributors and products to

Laura next question.

is from of David question Guggenheim next Our Securities. Westenberg

question. Hi, the for thanks taking

past at COVID. want to So I take a look

being percent tad in the do pick number maybe of on is outlook, pipeline, the part of new revenue a do you under practice Here, a to a portfolio? innovation you that in just practices of year of of then like have? higher like the looks out about when your second going one revenue. the XX% kind What up think optimal given terms innovation year consolidation your that And you COVID-XX talk trends, last XXXX, leverage was believe

And you animal, companion sales course you. think consolidation about and talking you Thank there practice I'm of consolidation? have the right veterinary approach

question. of you Hey talking David, one about clarifying in percentage sales R&D? Are

I'm portfolio And out do I $XXX in about what you in optimal XX% is new be? was the What you think is, mean, the innovation look a your million you that's would math; what XXXX was think could have as number lay so that I I mean, the I hope this number XXXX. slide Yes, talking it total say, when to we revenue. maybe you of market? you're innovation bringing as you your

for Thanks Yeah. clarification.

you at mean, out just it's but So strategy even I into say I think as is look a heading just level, look can our XXXX at XXXX, into start to I would IPP of high I look kind and innovation.

well thing to company salmonella the portfolios the our cetera. First is continue Aqua launch across like and key products very and perform et

dozen got are growth over we that products that in are mode a So launching.

from We will bring Claro Seresto in Bayer, like products as and well.

of a got we've headroom linear start I lot these approved. a to again, that Then, products a these XX there already and of see, as that products, are launch that want room approach. I with you of more are just lot emphasize So

to we era strong look at that out a pretty coming next of for constant And continue here as five again, As being our flow. see then, innovation. transition we

as the size at that be of lot it's a that not continues too able that to and we a price process. optionality, story of see wise, not emphasize cost and we'll time, margin being and we Todd capability percentage Bayer up going scale together, are agenda then, can on expectation the And to letting we the investment, everything to able give in remain. growing integration point a Elanco more would facing, us that to put see this to is And and expansion the elaborate. would I we just with the optimize see lot But

expansion, our a story. a And that omni-channel do the margin can good probably about Yes, this but leadership very still feel we the is some company the expansion got as FX what whole, the combination overall event, the one-time provide. and me of excites what at with with scale we've the challenges, can most with we had the but size, importantly, we looking with diversity most

early as starting it here, year Elanco. and for see next as I So forward moving over this XXXX

Our next question is…

Just moment. a a Lauren, moment. just

sorry. I'm

think, I environment. from one the key that's of

think vet a occurring. I the that's that's clinics, question of been trend on the consolidation

bigger consolidation think about. As we there's say on been there's also get that other is know the those are acquisition thing and Aratana And are and specialize. are are not distinct in I our are us can but very segmentations, again, clinics surely another to I done and that adapt, what we've they Yes, and But and would focused there's is been a with specialty room trying between clinics. to some trying really we've independent that's as a better, services lot to still and continues There that provide that sustainable. I there of innovate, bring on growth continue for them. think vet industries to corporate lot of clinic talked grow

So accelerate yes, there'll be it. consolidation will

more importantly, of more early, there more the I more companies. it's some too think multinational but you're to outside see maybe the which But may opportunity for I Health even think Animal U.S. so. be sophistication going brings as even

Great. Already now. thanks. Laura,

you. Thank

of Miner Cowen & question is Kathy Your Company. from next

questions, I Thank two you. please. Great. have

food of QX comments things in see the sales kind you much The watching OUS question to animal, the were I site food Can any on maybe of that, you commented one buying therapeutics prevention more we OUS alternate stocking? alternate on the particular Is and channel sales? Are about of you. helpful. U.S. and some other when anticipatory to also think how XX% talked go the you've all first U.S. growth to were would some that And the be of starting pointers sales. dynamics or but products you're animal. channel? any Second key Thank related, quantify

both on sides. but we across the alternative thought channel, on all so there, just segments Yes,

our So reemphasize about I'll sales, our and in all XX% the just it U.S. of mostly company animal total categories animal represents in

of again leader of Todd? part all Really our again against all base, of the well So really smaller to across but highlight that categories key and as our would want be partners. ecommerce though growth. overall

buying little where the I of on destocking the U.S. business a certain did are there and inventory food was OUS in have side, small export animal ones on mean, animal small we shipping. anticipatory third food amount the markets on product no rather actually don't bit They distributors. entity both Kathy, Swine have Ruminants Elanco our there. we and actually those an of amount but bought had and of side. availability They a concerns a & ground, a on party poultry the and

we farms. sales accounts. still corporate the on China really accounts But ahead on backyard smaller anticipate OUS, AfS so we've expanded across progress with on so an the continuing a our again, start we year being on little But that at the is but we're seen the issue less with overall, business concerns -- China, there mentioned corporate our big is at still of than the swine AfS bit and

the plant food animal, really the Actually, processing there. little to the western closures us Brazil been Real that. we're With very attuned bit for has in devaluation OUS, respect been and of to there's a staying of impactful

our someone products more get there's from trade just, effects. as As cost standpoint, $X down expensive as just

poultry maintain that teams and are during our able to if Europe again, been on of continues times, through much COVID overall. very has across we'll the it see top But

So than But and U.S. again, the we're of I've seen again, animals side less the close very backup in the processing to internationally staying of that.

please? question next Laura,

Jacob question next from is of UBS. Navin Our

environment. I years? the will given When you you remind do our my Really less next think over as in three you totally for will can closes COVID question. get plans challenges Hi. this taking the be appreciate well than your us once you think where the help. much so times? as forecasting But understand to one-to-two the deal deal, deleveraging the you Thank leverage of

side at the our the expect originally QX, We QX a coming expectations offset business as own leverage favorability to in higher close with do result Bayer Obviously, and of here these a results. after we the impact our drop in EBITDA on anticipated of quarter. by in strong and be

focused At the feel was up flow business. time, it setting and same on in capture Throughout we're our the teams cash this and the ability the very integration of generating been that much track. like very confident for we combined value we've the time, on

us XXXX. is guidance giving And makes forward. so project to given for from address going our going to to It COVID get ability below it three difficult we're not times, keeping that to

having down just that being can XXXX. focused current said, we we're as very That because in as high get quickly debt cash down COVID said, the probably delta the don't to that, XXXX, as debt environment. of but many by be, That little this and be of will here inventory had make, of three being a certainly a impact there quarters how in shift get the we to our anticipated bit paying that year the we be question delay of end leverage think like going anything or within the given challenges I of they'll is to

we think have in I Laura, queue. question one the more

Yes, sir.

is Evercore. from of question next Our Umer Raffat

in Hi, said you cases up this in around might Avian Thanks mid-April. up in how A in know quick the follow for any I is I it Parker become color the available Can flu be the that. much popped for I exposed so early had on trial provide South Umer. question. just is and Mike ones. few that taking some chemist [indiscernible] Carolina of but Elanco to my it's And guess days, have

customers any over from that offerings? of in Thank So your you're weeks you. terms a couple for now, hearing feedback of preference their early

we but at and it's as animals. see that this on we on that, really Turkeys it continue Turkeys it's competitive primarily Companion question, And comment well contained. would to scenarios monitor anything Real quick, then, Mike. changed haven't the Thanks, stage see assumptions first be don't in in the significance. and of We'll and contained our feel my pretty

marketing competitiveness Our both campaigns full side in mode, feel with good whole the very want We've full marketplace. have that, to the in are well a again, made about side alterations our on very and is changes but it. to that continue as monitor in we occurred and and adjustments, we motion, sales I execution the to continue even execute we'll the clear be everything

enabling But emphasize new and want is interceptor of when growth on again, placements growing really from in perspective We everything track being great area a at as one our a placements job planned like doing and are products. we we and the had fastest for look and new tick XX% lead again, what of teams you flea indicator saw to and Credelio the that.

had we one Laura, queue take. in we're I happy think follow-up that the to

Yes, sir.

is Prasad question of Balaji next Barclays. from Our

any metrics need contribution of is that part anything up. to the of own The key mentioned return exclude to just more Secondly, that XXXX your the there we is important follow basket? taking you that his we metric need for dynamics color capacity. get you. track I Thank on end products And Would five by Hi. either wanted you spoke it? track? also to lifestyle the launch Thank you XXXX? processing or Bayer most that see else or check in that on would of BBB we these launches some to on terms five of biologics and just to the wanted

intention of But more time lot wanted give comment one move does to to say will any today Schacht, give was R&D what won't Head so meeting that we this this investor at color. It's not color highlight and a I no, combination company. the to I stages specific, time. next that any is the appropriate include do Yes, innovation again on at in Bayer towards of final as it in the era products we will of preparation. you and after to with little hold Aaron our a

scattered period. a do upon again, now additive see an is the know that be top on lot we we could five we'll but Two, of a that of effect to So, XXXX a that that pipeline And throughout their have. more the like and day one robust deal. pipeline

So that that's important.

our There so and products comes will to and or margin, between getting Food be is the size the our first and, relative threshold animal so and in and it to meeting compete cover geographies the to would a say of out I IPP higher it coming ability portfolio when most either and significance animal the mix best-in-class. will all mix strategy continue to Companion

So very next five. these about come, we innovation good feel overall the more portfolio but of to again, and

just finally, livestock some And metrics… then

Predictability earlier, spend as the lot Yeah, CEOs looking priority. is time think to right. is the keep meat the Todd's exactly to well I and is with producers, in Washington at point the companies major these these to been continue employees on plants. customers we've in to our in phone of want as you're forums predictability to absolute engaged a of the what best and coalition's of safe both for plants the operating opening the their we be to our need keep But processing

and has probably flexibility Smithfield to not Number to this of morning more go the while most, and is pigs having shorter has pasture. one to plant more the the Poultry pigs. the that like in and optionality. one, grocery, between I moving cuts a two to watch capacity Cattle and say the where would retail cycle are to two caught flexibility life

indicator the capacity plants is watching to probably to we're the pig and that full back opening most. lead, So lead

to With thoughts? Jeff, quarter closing almost some want you pass. a do offer

of addressing said I more seen forward the I and this just all we and durability this appreciate the engaging the that like Yes, you with of questions I to emphasize appropriately specific my again, of comments, want industry. need any we've look have. and you to in and never industry importance more

the As shortages of and world. at -- shelters, companionship protein to pets eating look protein around animal the course, you empty pet

we're durable. that's a great industry So in

We are this building company industry. leading in a

of across the margin on IPP and we We from value as standing of up that again, to milestones expansion. of we pipeline effect is the companies control the about our that mid-year, Bayer as to And Elanco growth more excited more new move combination track well two as our on soon. all these we have the a the additive which and track key can is feel acquisition leadership to and products the

results with that It we're the us you stronger, going continue our with distribution well. time and it would our as happen. the to your going this time. distributors look right their But it's was when and the competitive more with partners and planned Thanks I year. We COVID ultimately, have to we'll a And strengths to play from started did continuing we forward. today. making event to dialogue But that. get partner we for was our right a decision, forward immediate catalyst one-time that emphasize And not makes

this and concludes gentlemen, participating. Ladies conference call. Thank today's you for

may disconnect. You now