Elanco Animal Health (ELAN) 6 Nov 202020 Q3 Earnings call transcript

Hello ladies and gentlemen, thank you for standing by and welcome to today's Elanco Animal Health Q3 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions] I would now like to hand the call over to your speaker today, Tiffany Kanaga, Head of investor relations. Please go ahead.

morning. Good joining Animal for XXXX third for call. earnings us you Health's Elanco quarter Thank Head Relations. of Kanaga, Tiffany I'm Investor

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

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

the Exchange benefit community. in including our be for on not Slide Commission. sufficient provide with X and products Our actual due and about materially to XX-Q listed differ not The Securities Forms to a and those those outlined information our of results could we for pipeline is prescribing promotional intended number It the latest XX-K and is investment of factors, decisions. and the filed is

the contain our slides referenced the discuss over information during an section call. will to find your financial call, and the measures happy release, turn will also workbook today take The the highlights. non-GAAP of this provide prepared Jeff that elanco.com. can release this call After the further remarks, press investor questions. press now on to in investor about I be we to will we the slides and our You

acquisition restructuring. third our date Good expectations announcing deliver largest executing on closing with Tiffany. for while and quarter, our Bayer Health initial the everyone. Thanks to In with morning, industry's the the stated continued Animal Elanco discipline to quarter, all

Our is progress. strategy underlying by positive business important to generating which continues perform and is distribution bolstered our

are standup independent integration and track. our Finally, on

the ERP in moved actions. our million with completed the end and the and legacy market We end in share and margins productivity the the leader of decisiveness including approvals flea, we to $XXX stand Elanco distribution balance of we out the ended with strategy We And retail QX. shareholder received pricing, our for announce and of product quarter IPP Credelio stand first and separation repayment end agenda guidance. in benefits quarter, track the me quarter. with channel the was expected value with commercial new our ongoing cash the from and and our of execution in Slide our up Specifically, by and X we market X, margin, on our XXXX. high sheet. positioned in gains expanded achieved cash is expected outgrew strategy heartworms now X launches Ultimately, least finalize to of working at to and comparably from summarize loan gross productivity let through posted the the capture by million and quarter. speed the portfolio in Bayer receivables, U.S. approvals with the Galliprant Became drove are term on X the We On provide acquisition competitiveness planned Lilly transition innovation value. and We initial improved our U.S. at conversion, Elanco $XXX tick

$XXX legacy our Elanco million delivered end at high guidance. On of the the topline

and by sequentially seven the growth Farm by improved and Overall XX% addition by of on was of growth increased margin contained revenue the reflected quarter. the category discipline, weeks basis the lessoned price Animal productivity As COVID in Gross X. XX business business. Bayer by the invoicing ongoing Revenue driven XX% and higher detailed of margin underpinned from through legacy contributed anticipated which are Slide improvements, pressure and from or million points, Bayer, our $XXX addition business.

headwinds mix represented offset. a Continued partial

a our to debt ago working versus costs process, are Rounding quarter And capital, adjusted XX% began impacted of and that adjusted year the in we days the finally the sheet day balance note, it and Bayer out re-registrations third the managing across down and we was sales. deleveraging quarter, We period health inclusion improvement our In animal on $XXX was cutovers one, rigorously outstanding. costs third sales EPS the on achieved the P&L, $X.XX. important million began organization. sequential while of EBITDA in the of is further

All of and our I highlights significant and our the focus with and these progress global this time execution organization in am of our underscores history. pleased during

a traffic commercial maintained performance. X, our Pet overall Slide we environment dispensing to Elanco Moving versus let's share year Health, in legacy key and last with build discuss on U.S. and year-to-date outperformed Beginning basis comes for share global the and This on strong. the shaped expectations continued were a The performance vaccines products. the of V top clinic in quarter particularly business as our recovery. in vet backdrop industry favorable third

our flea and with market tick clinic. third XX% dispensing continued data up at Credelio the growth gains Kinetic led quarter vet share the product in Our showing

and pairing year-over-year. We are for June with that Plus improving tick with XX% is it the in shows quarter Data the in Interceptor of Credelio seeing Plus. further Kinetic points with flea is sold traction the upward opportunity solution, time, X XX% from percentage Interceptor paired when and a third

the divestitures. U.S. according we continuing for but part our our of coverage Health branded well, distributors was represents up customer our market loyal to revenue base core year's expectations this resonating in performing U.S. the initial actively the pet therapeutics Pet with for last benefit last line our outpace in clinics dollar at Data. are are the growth in Pet portfolio. line In profitable broadest EDI digits with channels is large alternative for retailer an year's adjusting where is and this and overall shifts in product compared Galliprant managing mid-single from quarter, the Health sales stocking Our offering of share after legacy to year vets Overall, from parasite a third Kinetic which to vet with older, the reported trends the owners. Trifexis Meanwhile in

second quarter the consistent inventory We exited the continue to distribution target manage channel levels the third closely with inventory with at levels. in stay We to quarter.

while that on supply These the the and the in U.S. impact swine. our cattle was COVID-XX backlog, representative Elanco are U.S., felt port a a and factor quarter the and a challenges our business, Globally, for line Moving quarter, sub guidance. producer certain was period. processing improved eased greater the $XX that Farm estimate encouraged both been protein with domestically margins numbers the swine cattle million sectors quarter. We've on lessening the animal chain About the in the summer to diminishing and COVID-XX revenue in primarily headwind legacy in in through we higher international in slows. pandemic health pressures of to business, in feed since our allowing Animal [ph] sequentially by

is timeline XXXX. still industry momentum the expect we the normalization promising, do While to for extend into

despite we Rumensin, commercial For sustained strength see disruption. generic

the driver broadly by the the months In after business, planned is me Our of markets are driven tracking start expansion market appear to Europe. in variances a our our in where stabilized successfully uptake share let quarter with product’s meaningful the differences country. team and with of was cats than outside as market have around entry world better Pet international quality competitive Credelio quarter Health, of growth assumptions to Credelio customers. therapeutic demonstrating originally XX in and for the some U.S. by

On consumption unfavorable affected and the conditions portfolio was side by future macroeconomic and negatively reduced farm protein our trends. health international

Elanco due production offset As including year global vary species, in global in believe XX% the headwinds across regions, aqua and acute and relatively Production wholesale an demand have which and has towards industry near-term our China the acutely widely a most high volatile Central estimates to to Thailand these particularly markets of than this and and markets. dropped markets. of sales composition result with poultry impacted and Vietnam. restaurants supply to We notably from East and the Balancing up unique we’ve In which prices poultry additives. and reduced India, degree India seen like challenging outsized a profitability America, result seen Middle growth compared declines export has portfolio proven weighted more market, certain for X% prices more as declines premium producers. on growth China producer local XX% service in pressured price is dependence food industry feed respectively. have in Poultry opportunity

food trade tend to products aqua, remain severe performance, pressure, start of products seen we’ve disease to Transitioning the had impacted shocks while biologics and solutions macro experienced see treatment year. like and the As since of we poultry related to with stable. salmon greater premium adverse the more producers XX% down prices Clynav. These conditions of use economic economic premium industry out producers safety

we year. growth in we Elanco as health to for return a sales see XXXX, gains aqua future provide important over to total growth market share is international continue the but growth and to potential still This we likely and both and to in persist volatile for XXXX However, time. view expect for robust backdrop species protein next in drivers

and Elanco Although, robustly of conditions year’s compared our business and Bayer, China’s were fever sales provided third experienced improvement decreased continues quarter producer Legacy healthy XXXX. International the This a the growth compared headwinds. swine swine business to offset. Ruminants year-over-year our than a Both saw and and Legacy last macroeconomic to was quarter the also African by in portfolio profitability, as up Asia swine both pressured more XX% recovery partial swine

organization. of discuss let's Health side Finally, Animal our combined new Bayer

$XXX million. reported a or revenues health approximately For July, of Bayer animal million €XXX

largest $XXX remainder quarter retailer result quarter. of integration As stock-in, seasonality, retailers, In pull the was few well $XX added revenues for combined million in for we to months business QX. line Bayer pro quarter and X% system some for estimated the the represents and first million reflects COVID I Seresto, ahead progressing. with underlying impact quarter, impacted short a year single of observed seven cutovers. half. totaling robust is stock-in Advantage I'm million growth strength deal the Elanco’s but demand for the of first the X% from divestitures. of the The encouraged Bayer we months the remained and both family higher to in was third by mentioned approximately our earlier, we unwind driven performance in $XXX inventory revenue which the blackout Legacy the for The growth this first the retailer Elanco, the In our business Bayer in a the $XX on excluding million by overall just believe by to about contributed that of of forma quarter experienced now the in the nearly how unwind growth basis the as period together, product support X% close. of This

of team complexities size managing still be Our our an stand of Lilly. fully independent up while is to this from acquisition the completing

in thirds with $XXX remain [ph] on total are million first We announcement. initial moving the including I as thirty the for earlier, As first in mentioned track by $XXX restructuring two speed our we evidenced to synergies, months.

combined we challenging competitiveness, Our is realizing commercial innovation focused especially delivering and macro on navigate environment. a synergies, team to as continue

them right We have the execute into in the of right beyond. the balance people plans momentum the with strong year place, and to

to continue against Moving progress our we Slide see to strong IPP strategy. X,

during Let's strategy few we with milestones our and look a approvals the key earnings of two this quarter. achievements new since Starting at last call. on the received innovation,

for weight will a which kidney disease, The valuable loss commission first for cats approval disease. our treatment approval respiratory to bovine chronic is product with Increxxa, FDA received for Elura, the for October, U.S. Animal a we complement be portfolio. European also In a management Farm and swine

on by end towards of Cosabody the many to two picture, forward XXXX. these launches the a potential fuel over on Bigger we’re a end alongside innovation will XXXX long-term. products of about large the approach pipeline our track our five part December taking remain algorithm we in sharp holistic on look XX. Investor addressable Experior at to With I'm our XX by and excited goal and least efforts sharing of differentiated at more which including We markets. growth Day

have we products since that our of a The XXXX the brands XX focused front, group or growth. portfolio launched Elanco grew Legacy solid the in acquired quarter. On drive XX%

and year's tripled size retailer capabilities runway have especially to Bayer of a Seresto International on for is the across XX. initial Pet serve and our we adjusting long customers enhanced Through like at channels whereas globally. new in Bayer markets ahead portfolio all shown our an divestitures China. Health Advantage still slide business Excluding last stock-in and have

industry U.S. and the alternative flea, now quarter. the is retail in and the the heartworm combined the outgrew leader channels On Elanco a market these in tick in side,

and expense on productivity, and we the on on from in incremental Finally, remain operating savings quarter relentless reduced and cash travel related management layered expenses.

the cost [ph] drive savings and end as avoidance realize XXXX of to continue are also manufacturing We planned track from and efficiencies the on through the to million in $XXX year.

next Investor to share more during December expect phase on We our our Meeting.

the gross performance, Legacy to discipline which X% maintained our Price detail contributed Todd XX.X% over in we for productivity quarter price will and Elanco. a up Additionally, in margin moment.

next beyond positioned year sector. I to Health IPP our As and the within look uniquely strategy Animal has Elanco

actions Our the moving stakeholders stage meaningful turn our more results the to of since to that, IPO strategic set our I’ll all and for the call valued over have forward. for creation on Todd color outlook. With provide

of presentation Slide a adjustments Thanks adjusted presentation. describes Jeff. results appendix my our adjusted made I’ll GAAP arrive while today’s results items description financials. on the earnings the summarizes XX GAAP of summary considered third results GAAP results. you the include of underlying changes provide focus months XXXX Slides release with to the two to to our insights Health. our at I’ll in quarter quarter refer a XX third that comments X, also Slide to our order our the in the in adjusted year-over-year for so our X trends provide in on Animal the detailed in press Bayer to business, measures remind please

increased the at X total the Elanco revenue a measures basis. you’ll the Looking quarter XX% on on adjusted reported in Slide see

Elanco’s the of Bayer’s basis negative the X% a gains compared price revenue productivity XX of effect by the of I’ll points was in Legacy margin last was a down legacy of the spread Bayer had in portfolio, benefit operating of and detail and margin the revenue as third XX% of total as an advance fixed expense Elanco the further mix at Animal driven quarter business, percent to increase footprint independent August Gross including on a positive exchange quarter as of break continued impact. Live year, Elanco of sales and our Foreign higher inclusion of improvement well an increased Health XX.X%, business moment. Bayer the legacy of lower our new absorption Go by headwinds, business. the the our third cost quarter, the in manufacturing partly system over on first ERP addition offset XXXX, our in Total in growth September.

increased operating At million. of to as management in in period our our of decreased X.X%, year August, impact cost about was blackout through decreased [ph] income on tax tax, two guilty XXXX. are reform As this to a one, that rate At QX QX sales still subject in day the in continued cutovers XX%. to business the period, the bottom effective sales, income Operating parts while of Elanco, percent P&L experienced decrease XX% line operating was Bayer's net virtually. U.S. operating reflecting reflecting from the which many adjusted ago in XX% income The XX% as introduced international period Legacy to weeks. of cost expense the in a expense reflect tax was $XX.X

the The can Our see price, XX, adjusted benefit a you performance. On on of revenue reflected in was volume. EBITDA Slide the volume acquisition Bayer and rate of margin XX.X%. effect is

the addition is we business next with acquisitions, quarters. will the report for in typical Bayer four the of volume to continue As

Elanco increased Legacy ongoing competitive overall revenues business, demonstrating X% for X% but performance Bayer. the XX revenue In pressures. benefited provides detail total and U.S. innovation discipline the both the COVID, and the our and also quarter, up value from which more the the U.S. were impacted grew are For despite of was in on applying of our the we addition XX%. of internationally, price by Slide International

file We shortly. to XX-Q expect our

cash leverage, loan So term on off. XX, me an our including and slide working moving update debt paid provide our let capital, to now recent

an we In We all to XXX quarter discussed, improve have our sequentially in and in versus standing XX cash the days terms. on of million at the XX first equivalents XXXX. U.S. the payment focus sales working third day consistent area us. day of QX, for days, peak sheet. capital balance the of with third quarter $XXX As quarter, continued distributors ended on with In outstanding was the we have

announced the acquisition. quarter, term As Health we dollars loan the on Bayer funded million repaid the our of end Animal $XXX that at

focus operating cash with our in XXXX. debt XXXX, will $XXX is to due August a our in flow note, million of which repay We continue from on

still the end leverage is debt net at QX. Our ratio times of at X.X

requisite in Elanco services completing the up are IT the our independent transitional certain of we The country of Elanco The $XXX reflects prior deployment a remaining to transition $XXX million in as travel agreements. vast the the skill protocols, net XXXX borrowed AG transaction October, completed increase completion Once year. year, should confident COVID-XX of restrictions as well the the will part acquisition up build of infrastructure the increased this the for range the asset $XXX of purchases, We drive country Bayer acquisition. heavy back, of of global and the in culmination of which During stand the cost infrastructure and ERP cash team company total the infrastructure execute $XXX uniquely are environment, the costs. remains related site The given will up the additional and for QX range with system operating the majority local, now be the on cutover revolver million Elanco repay cash pay infrastructure, of of local stand we Bayer $XXX Bayer price use ERP to $XXX independent circular remain primarily and cost IT of business. revolver. the the of Elanco million, estimate stand fund The complete, versus as higher pandemic the our will and the result we and to ERP execution purchases transitions Elanco be the in XXXX. the cutover to with independent offsets. to IT now Lilly as purchase ERP to

the X-K to in XX as October I forma the capitalized approximately Elanco business. pro share infrastructure the million ERP filing, in Additionally, note the financials $XX supporting Bayer we that want for

on transition XX. will I Slide outlook our Now to

we quarter total fourth XXXX, Elanco $X.XX be billion of expect and between the For revenue $X.XX billion. to

Our our related Farm Animal approximately to COVID fourth quarter of business. of estimate $XX guidance $XX million in million includes headwinds primarily an

We are Europe. of also another taken the broad being monitoring actions including potential shutdowns in of impact currently phase

shutdown reflect earlier U.S. broad or However, does not our saw guidance International this we a year. as

cutovers. to side forward global reflect business, $XX Pet estimated On revenue continued the and quarter COVID Health IT an will of of due Bayer the million of our reversal fourth pull

inventory, For to retailers the and $XX incremental full in that the is reacting to base year, recent with across Bayer's well packaged consumer we counts. million trends of larger additional and to this case sales XXXX, balance ongoing as believe rising are compared an retailers holding that appropriate strong backdrop, match goods periods, as larger the COVID trend underlying and

in quarter guidance of headwinds revenue Additionally, part India inventory, of discrete Posilac and lapping the other number Bayer of as growth, fourth regulatory to of the clearance divestitures executing awaiting including incorporates typical acquisition, sales a deferring the impact our increases prior Xst compared trade timeframe. Bayer fund versus under sales reduction periods. at a treatment legacy to our Bayer accounting sales January price The to U.S. as IFRS reduces all also certain SG&A February GAAP under of

for Importantly, fundamentals sides including line growth X% continued our in the X% however, growth Bayer's with underlying to year-to-date, our both business on that is of grounded in outlook global portfolio. underlying trends are

guidance COVID-XX. not introducing from of are effects at the EPS future volatile macroeconomic backdrop, this potential and the time, given unpredictability We

advance let offer our Day third deceleration me at provide fourth commentary gross details quarter a addition cost reversal In for as mix of cutovers January margin the the Advantage and on benefit sales reflecting a some and result sequential as seasonality in normal meanwhile shutdowns, to operating seasonality in our in metrics. the on We down headwinds well step the plant fixed the result quarter's of expect Elanco ongoing and XXXX the deleverage. to from We of Investor absorption guidance. as ERP in anticipate Seresto and family, more maintenance

XX, pro three capture declines year-over-year to with margin of forma on Elanco respect will productivity in X-K We and filing. provided business. the expenses, expenses remain our October Bayer's higher Legacy months disciplined Furthermore, Bayer quarter continue anticipate the to Legacy expect to we to relative for price. operating include and both efficiencies

the travel are benefits. initiatives outlook on to the Value cost benefits management early Our ongoing in on continued reductions reflects curve very remain from capture realizing actions we expenses. track, and but

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

Thanks, Todd.

inclusion as me from a with the key shift. of We Let model quarter and progress closed Bayer stronger strategic the distribution enterprise, positive summarize. third seeing decisions the

expectations to end discipline the are We stated and executing with of high on quarter, results for the guidance. deliver urgency at achieving our our

health the pet key the with products momentum. share with year gaining balance are entering and We of

We on XXXX. our to independent the and underway phase stand making are of necessary final decisions integration value. early The completion moving on tough up capture and is the for in track quickly

Healthy week. world's on its Nations productivity a Slide is want the through of last continues are margin combined highlighting and XX agenda Elanco decade health IPP I today United is access These to and end long animals commitments Purpose that the sustainability a portfolio, stronger first commitments with that kind XXXX Sustainable a in to we industry. animal Goals Our greater growth. strategy working and to Development with the enhance pipeline unveiled progressing support the

for driven and growth, shareholders customers, turn by value Our Through to healthy we is to footprint protein, the that, We elanco.com. and pledge starts people's detail pet pet pledges to reduce companies increase protein, provide these on the it agenda as website to focused health are expansion being. planet employees, at Elanco with the in support well against our is a over and of aim It access executing. and moderate whole. on the Q&A. on creating customer’s innovation nutritious With which society the Tiffany strong margin the a and efforts, enterprise outlined improve our and all to these our planet, I'll

take as from callers many as Thanks, possible. to like Jeff. We'd questions

So question provide caller. and up. Michelle, take then first the the the yourself Q&A instructions session you follow limit please to that one we we'll one for ask and

America. [Operator Instructions] Bank The Ryskin question first comes of from from Michael

open. is line Your

want X%, business but I'll Merck everyone back in Jeff, able the were the enough livestock livestock declined your business to prepared ask out accomplish, remarks Zoetis gets just I meaningfully just If Bayer’s you the been in was I comments peers I'm on getting quarter. in one the I’ve a time. if mean, some at pretty focus we asked what like X%. And look we sure Thanks. up other decline. to the make it up was Elanco Livestock something Animal Phibro was quarter. in X%, contribution, up to looks like know Legacy double-digit Livestock try Health to

despite COVID So is businesses geography, to in can you that seems through we that do that and more we for the impacts when some detail? of them that from here, think sort very What's it it little a discrepancy and other go how into XQ, what in And like up anything by expect can start cattle, then headwind by well Elanco? species, out? works showing about farming sticks benefit

Michael. thanks, Yes,

are and I good first said I've of fundamentals being swine we plant the places improving improvement I that all, portfolio markets in in in very I and the see cattle COVID, all differences mentioned where pigs, the post and capacity, think our about is in as mean, I in a positive. I markets. is, first the of the feel backlog, diminishing business the think

of swine and fever. stay would African up I again, the positives recovery swine strong overall think some from I

some say you then So of the these key, are just I'll and some outlined. the pushes that share would differences I of

both said, positive and see positive. side the strong Asian is that I think a side area, the on I on even Bayer swine side as the we in XXXX relative Elanco the growth to

some our we're would decline overall U.S. a generic there. the what me there see is one a finishing and when you to we relative is is in is positive the is highlight at Aqua. then to expectations, one, are that year business to -- And and our say continue the well got but poultry fundamentals relative of we've doing think strong, to We I [ph] medicine What look really in differences

of a part for continue seen but as on feature dynamics. which share, growth away salmon big by part this We take continue impact not where economics but to year, the market pulling its will impacted plans Not industry that we've been they've industry is of sit, one Animal has they drivers our products Health by our us by is growth, what major industry and of of just products. protein actually health and use from our been be, by the and

is two, some key will question drivers contributor business by and is look I Again, to being International poultry the Animal XXXX. no and we Second our products; and the see fundamentals protein ‘XX, usage and and we key of a in of of health of to going Health of protein future XX% on impacted these growth Aqua little of health trends starting them effects ‘XX, significant poultry, again, XX% that's well, Again, our the the growth as and But recovery, as are back the products. of as of impact. been bit international impact certain COVID poultry. introduction and COVID and the lingering new big into into future as one a persist where in a pulling even continue a pretty look, share there's kind in poultry

There's would as whole, expectations. very relative relative to feel I a say so we a little good to poultry just international bit been Okay, a setback and our Aqua.

next the take caller, we'll And please.

And your Goldman from next Rich Sachs. question will come Nathan from

Your line is open.

industry drugs the for an of Jeff, kind where ask piece to visibility questions. bringing on on market new the is of key obviously, the to pretty has pipeline. been revenue I and outlook. Good Thanks This of pipeline that a having is limited. morning. Obviously, innovation wanted the flow

launches, sharing see high of You at likely get maybe of Day, kind disclosures more opportunity would Analyst as details talked as as type follow the a to the also the there can we're well the the quick and as but Thank provide a market about be attractive four at talked what a details timing most you just market of any opportunities? you. recent can those you about talk you potential approvals, helpful? up, about And you on level

Nathan. Yes, you, thank

pipeline and our level, just is a of at I a So level, very is, very high would feel detail. some at real high quick, into get where about the we we'll say I've shared good

products, year. at well We remainder and the have XXXX added you're Investor going the highlight beyond going look from in of approvals talk products here year, One, from our we Bayer, seeing with as Pet approvals, contribution about that Elanco, an for new between portfolio. the our point. a you're and as as bigger X can of end XX, starting bigger, innovations now play Conference. strong X and this next That's XX to as this what the more that forward. to of mentioned, X contribute more I Health think what mix least I in we'll see significant for markets, overall see material And At

to we'll So parasiticide, about is be is, flow in market exposure they replacements, innovation, contributing growth Conference. a we're in spaces how very five-year and constant therapy, about bring about relative of on good dog going our into this those constant What we about the innovations going side. But do a Investor good while and capability antibiotic pipeline over and and next cat you see the to growth flow talk lead of what the a that at innovation and factor. Investor going say what into, feel talk the driver the and that continued markets aging see to at this. to algorithm would pain, scale, side, portfolio have. on those, therapy We're competitive that very the contribution I the to will size our this I to we contribute I will the all the feel Bayer’s period, balancing pet and therapy livestock Conference we're we of constant markets, highlight

Next question, please?

And Wright Suisse. Credit next from Erin comes from your question

Your line is open.

a does there? aware I there's the clarify moving growth of there's and destocking playing guidance in for think what then quarter in competitive of we for Great, helpful. Bayer aware on that terms Production or would up a if an dynamics million the sort it's Can the mentioned separately, the assumptions it's we alternative or question the Thanks. even wanted as assume update stocking in some thanks. least be Companion Animal Advantage followup on business, of fourth the major you is quarter business. well, into shaping if that $XX be at fourth how and be long-term us Elanco give I standpoint, should that into should the inventory what divestitures? how And pieces that you of to channel underlying in Animal? channel, And from any, excluding XXXX

of not it’s Erin you for versus as Bayer question. Todd, thank for we've QX, separated Elanco guidance. Overall part the the out

in are out happened We India of -- have year-over-year yet. hasn't including number one play, the items pointed registration a that in

the the and get that's Seresto for retailers have what little growth year strong Health channels, those to growth well, to respect definitely but that's about we in is of retail get Retail. X% all the think economic also the With happened chain business the are We the So half Pet Bayer growth in had benefits, don't sales. a the a to the demand unwind still in QX. we business. just the Pet XX the that's mentioned, U.S. that X% as total order first family this for U.S. you the $XX underlying effects. But, the do product year, underlying we Bayer Collar million We more a double-digit experienced those holding think for in a of million contributing gone think very because that's they Bayer growth in

for Animal at the Originally, the again expecting Bayer to especially run, business. a this year, good conferences the China. the they and very in Farm they've low excited channels and all Pet across decline in that do to as end with And growth there, total very online A nice our and well use it's And investor we With the will playing we'll refresh products, we out the portfolio, were Health in people have, we're we're pleased we retail did be again, And at expecting a those our when respect continue going we're that's family, point. this inventory to deal, be it. channels digit portfolio more we this single about forward. a higher So, had growth on talking family as by to appropriate year. get us, think of been entire well

question, please? Next

will question from JPMorgan. next Your Schott Chris come from

Your line open. is

the for Great, so questions. much thanks

I talk me from want to guess, two sales Just levels. first I about XQ

about I below $XXX consensus. million think it is

my baseline consider you're sales kind Bayer how with it laid on targets headwinds to your was ex know to COVID can And confidence census term the those estimates, much. being to longer the trying about normalized you I'm ex timelines, a I Thanks kind out, and in think a how second have guess achieved? question I an inventory a should margin going being? you I this just deal, level, the with seasonality update was laid about of So XQ sales half we of do particularly so get the XQ number? some mix. first think build hitting new we out normalized guess But quickly

XX%, With we're ability gross to question, to Chris, confident respect for to and our the the get plus margins. thanks EBITDA question. still XX% over second in margin

before calls, out. spoken on we've As those been pushed have

the than trade but On had happening SG&A, up where in more adjustment deliver does We the today our in out long-term portfolio quarter. XX% here January, call. the The under versus to said, year-over-year a this and pressure to products moving With on gross sales impact XXXX tried comp time, that February, GAAP are for EBITDA August basis, and Legacy to organic items impacts being At having of those in of previously being our amongst XX% numbers a is same change Elanco some on our just in at in respect the overall P&L. going have are the times plus growth. movement the were us. relative decline store out It's on those a in there and in confident that reporting, different That that seeing COVID EBITDA. QX the affecting that been to sales these and no in will we for QX call is and and QX, fundamental were for on seeing in we're the down discrete funds forward, been in of are price to competitive the we've Bayer, accounting margin a be pushed are number Bayer we portfolio, increase margin. ability

$XX we the million Elanco is, portfolio, dimension think impact the Legacy around divesture portfolio. Bayer is about other $XX The and on on legacy million just

of year items all without those that a the are QX, quantity So affecting in sales items those ago. a have pro would are absolute relative forma to what been

business the we share. would Health Pet for grow Bayer the too I the to U.S. Elanco, business, Chris, continue again emphasize I underlying think especially and demand

as A feel We about the the I the but of XX going to we QX highlighted, adjustments focus adding XX%. coming five products this is the into of see to that emphasize sequentially be that QX. good very forward, in change We'll up again, were underlying demand continue Elanco more would from Todd no highlighted. lot I

you. Thank

take the question, next please? We’ll

comes David question from next from Morgan Your Risinger Stanley.

open. Your line is

and Yes. Thanks the very corporate much, congrats progress. on

So I have, a couple I questions guess, here.

by X provide just the fourth clearly of the parts guidance XX going are X blockbuster But precluding of year potential? launching blockbuster of for earnings the XXXX so of potential many the those revenue that greater Second, by First, that have earnings are Could moving of respect very $XXX able launches, revenue Elanco guidance the end by with quantify Thanks none providing XX? those, from quarter. and X to have for how how would the company is XXXX December you to assuming XXXX of various much. in would given of million million are by for on XX launching please or how XXXX. greater launches that to the the full uncertainty, many end the period, than But XXXX? $XXX be I’m terms than or the

second do answer Jeff? we come earnings, able detail Jeff help we'll We two a very to great question, quarter, a to clearly, to out, first the provide provide respect fair Investor that weeks With with David give question one. take the respect in me the guidance. expect XX, is to how the do then with deal on us project to Let to you'd that QX one. a it expect baseline and be XXXX to in that Day to and I'll the greater do December let

pipeline. Yes, real on quick, the David

Health of all, First of flow entire five and Farm to reiterate a that think I mix Animal, between period. constant I want nice year approvals throughout Pet

be like We pet there. broad there. instance. animal in kind in spaces will we replacements be specifics into More be terms for and what and first-in-class, of parasiticide that additional will some we areas more products will have been farm spectrum areas get will therapy, like clear, of in in of like launching best-in-class, these Experior, very in antibiotic Derm

products. you kind when a there So where a higher a say larger ask would have larger, adoption rates new looking what we're bar, of through with numbers, or faster I been on company, lens any about different

Elanco So right of we've I products got be that there looking ability are that we commercial lens number plus the these will through creation with materiality, and Bayer, would market launch an say competitive and more that needing blockbusters. significant believe that of a those

of blend nice a series would I Pet Animal. Health be that there between there them will Farm at say a So and in line and and linear again

the that a have launches lot we're Seresto of a year, focused our before pipeline, ability series launches. of add and to were very And add going potential. the we lot on that growth beyond. reiterating And these very forward Claro looking with contributions plus there then good runway, were keep with starting innovation products capability, than Bayer with into good stronger transaction X products, about size other the with too, Bayer more feeling products and feeling you the So then we Elanco, about I with Bayer’s and as to this XX that and

some pipeline, growth. and our We our nice be that. within like of we algorithm blockbusters there like So will

please? question, Next

John William Blair. question next come will from from Your Kreger

line is open. Your

think will that quarter ‘XX? finishes as And Hi, followup, takes or normalized improvement necessary items? fourth think and margin. on little Can in that in a ‘XX thanks. trajectory stocking rattled off gross clarify the unwind a unwinding Todd, puts for take million. those Can I Bayer more? little on bit that kind the or needed of think then more just wanted expect you comments a should of number expand just gross you to longer about about the a that given margin your in Do bit I we you having Thanks. $XX of kind we

for will last seen U.S. retailer a for that, headwind dispensing Yes, an Sure, with that track level, really the in To inventory as on dispensing us growth Pet growth products given there to inventory nicely and those data that. growth on extent fundamental the the be XXXX, Pet of growth XXXX XX we that that's on will XXXX Bayer U.S, was levels those we've business the products months. in the historic products John. with to something we think in be have underlying for at continues won't the in we're for growth very Bayer appropriate pleased

down we On of a QX business. the than just margin XXXX. side, points step have basis was versus legacy step reminder, that's a something more It down QX on XXX in Elanco of as that XXXX

margin overall and what certainly a and we but something QX wanted that's QX So, business lower looks you seasonality mix makes a Bayer of level than our in like it The gross helps higher U.S. our the QX. out part margin, to plays parasiticide how the business know, highlight. of as

API and with we're out pleased cost of team track. our and the our reducing a with absolute and very to margin. that mix those from compensation through margin does ruminants headwinds are The on seen an and costs, initiatives basis side on called respect your Legacy fact, the Elanco we've continues to sourcing, benefit gross productivity initiatives earlier cost swine out the in the take gross costs overall, as and out on reducing So with business take on

that here greater versus do had to stepped continue QX just the down we in we'll provide So it, we margin to in we clarify but the QX. expect on wanted one guidance

Great. Thank you.

Next question?

from Prasad will come from next Your Balaji question Barclays.

line Your open. is

questions. thanks for Hi, the taking

I booked volume and goals get to price the are Post too. growth gain sustainability So market I in commenting comment the you introduced. the would like call just on that, market? a thoughts in parasiticide, parasiticide wanted growth on peers to as your person Your the and six on

this factors? the one stay which years? the we it to expected even market are two faster are growing and there figuring your come than so of Secondly, Is to are are some is we with are properly out anticipating, that or which increase or so, out? the So dynamics next what Thanks. assume launches if fair new you the not market to over share intact will what

very so the market, there. that we Yes, me the And about start first start let overall I is, good think on feel first question. Pet Health I'll

We've market we've in compliance. has I clinic retail also parasiticides. think this parasiticide seen And know as market. the vet the price attention the you COVID well. a in to all increased seen the the that both growth we know we've in V-shaped growth, and seen very growth We've path, recovery. strong seen nicely you see, as Yes, sectors, growth nice across

offering well. but helps pet this. drive that them is in believe approach is Credelio believe there's pulling the lot and example Pairing vet more and owner, marketing that. that look yes, the to and Interceptor clinic marketing vet a a as be compliance pet it our of by That and pet driver direct the understanding can And drive then we things a is also way by clearly we reaches and big pairing taking at that the I into And is of of of owners Plus them also, message. attention growth is when we odor significant. into increasing, would clinic a note, that all an continued, attributed reaching knowledge Plus, price an there We that a awareness helps but and volume,

our Balaji, product. to decline The there we storage in seeing note a Trifexis, are thing one

so is within the decline mentioned, that I in Jeff you're our market. think a managing but as And parasiticide that expectations,

think Thanks, Todd. We better thanks.

on a Just livestock followup with side Rumensin.

that it's than faring said what you had So anticipated. you better

pressure? is driving Could identify [indiscernible] what current the is called factors? the And the What's out India? generic you So the under version? what Thanks. market share you and this impact of poultry

on a moving premature, yes, a parts go sooner feed, we When on little our as that increased more with, run was a generic, in there's puts that's feed, about Yes, number question look feel to you ruminants good the of lot days at QX, that and see a little normal, actually question into talk the a on ability positive. earlier cattle we cattle of hold. the there cattle you no about from differentiate QX than there's there's been

there Although, COVID, from earlier size a this was year. market from change

of at changed when terms feeling has to total in value So we're of a loss that we look market in that, to size. relative one less, back actually year our relative up and XX% or holding in assumptions good

to very then… portfolio doing well competitively, and attribute this I So, differentiation. a lot product again, and And of

want [indiscernible] second of about part Todd do the you the mostly. question

lower, driving market and lower poultry in growth in factors America The India? Latin

longer it's service now mean, and food that restaurants Yes, you. and lingered the And a this relative the and has to we We we're attributed is are to more I international little and of been returning bit lot this go this. on XXXX. impact And a dependent know clear but see as we will persist has Thank that. bit a poultry of COVID little markets very it starting impact that into quickly impact. see later,

take We'll question. the next Thanks.

Kathy And from Miner your come Cowen. from will question next

is line open. Your

you. Thank morning. Good

business at forward? transition the outside of whether to million quarter? expectation? brief swine big comment a U.S. that's first headwinds that that all, to grow Thank curious COVID a China in you mostly on on your Second how for in QX. developing on and was one, and an That's if growth, XX that just of comment continuing part quick just the you. million the returning how, you your of guidance to trends least certainly the if in is U.S. And XX Is QX. the channel you a follow-up third see the going your Bayer and could that on through Just of could expectation or or

Sure.

to I was… first with swine So China, in the business question respect think your

headwinds was think first I question COVID

COVID headwinds.

-quarter. East, why headwinds we markets, just quarter-over a the do it some come in animal the Latin bigger it'll Sorry, India, poultry that's America, continuing, be seeing primarily continuing That's international not quantity. see farm COVID down we're the impact Middle impact those U.S.

on let side. in swine We the will jump Jeff

Elanco good seen very in Kathy of the growth, seen so both both Yes, good a the and growth even we've we've in XXXX. using I'll go and back very Bayer to comparison

positive so African and use. stronger fever I trends prices, seeing farms, seeing two think those swine before industrial really effect, multinational product we're more So are the we're

when we seeing both XXXX, the the that I we'll strong would put economics, and those benefiting tailwind side, three over the the again, both pre-COVID, some you we to So we're drivers, that, Elanco growth go those Investor factors put in Conference. big in XXXX Bayer see a and comparisons as talk Elanco that about back things as XX% into business on and at together,

highlight be just real there levels clear. clearly, just same. QX business, is overall distribution XX-day sure Elanco that to on levels And the the working. and very our That, inventory me to there business, is on were make at at are right the strategy Legacy it's Let our terms,

demand shared, I've off Our strategy, growing cash creation heavy highlight, remaining market and that relative working extremely distribution distributors that as four And relationships paid a focus. to have. improvement would pricing are we’re with very in is conversion I And and the strong and is better, got think within the well. receivables share. we that it's we We

was so very would And business. vet clinic for COVID in business retail ahead are all. on retail concerns. business underlying business by really a cutover and was inventory there's much there both But the that again, both retail there's that more retailers, remains little the driven drove buy addition, that, has and at Todd bit strong the issues In no about business the distributors and talked highlight, involved our that not Bayer pet what we

Next question, please?

David Guggenheim. from comes from question next Your Westenberg

Your open. line is

question. the taking for thanks Hi,

now. So but larger for a Entyce lot off cats? number cat much can you is of for of is market, market small cap a you given is cats just dog label usage in and We've and terms Is seen specialty worse? consequences about We've product. seen million to Bayer Animal than weight it's Thank an of to online advantage And, Health years secondly, and from then the to the an opportunity you health particularly this a talk in about just a the Do channel around market, acceleration fair your can the in maybe to the And retail Do say? mix? products? pet in pet shift box talk you that's into $XX think OTC around you. that there retailers. pioneer dramatic see

right where at we're chronic X% think treatment X%. best-in-class us. Elura, mode now the intensified again highlight is It's an oral but you're be, relative right. kidney to action? and just me be XX, in are here cats creation it be opportunity XX% a Well XX% have affect that you that of this believe the We cats the to to we We may numbers again, an a higher, a what old, Let first much incidence years affected. archetype know we and for disease older can relative seeing cat are higher XX market believe to as estimated exactly of can can

gets with So, here innovation mode like our solution. which back part first bringing we action creation to strategy, opportunity, best-in-class, big like this a segment, unique market of oral liquid of a the we

to how success the continue Cordelia really exactly heavily even in intention in is our cats being lean which will we that a much increase but and get And our to about highlighted opportunity in create a that see market by with and we won't an our so say this really we'll talk into in market to strong fee line product. nice again, we Europe. portfolio some here I is

you leader there So are with yes, In right retail question pairing we the a retail, similar our then is product And plus innovation opportunity capability, we leadership Bayer an need Entyce position and ability flea, to dogs. we good on is Advantage yes our portfolio and this both win. feel portfolio retail are in space. feel unscripted Seresto now this I combination and to of that our and a leader highlight with good tick, and Bayer heartworm, in very the some like And very about scripted capabilities grow in there no a look Elanco. is we some space, and and OTC are or that the would

see trends came these we COVID. that through yes, persisting So

please? question, Next

The Elliot from next James. question from Raymond comes Wilbur

Your line open. is

say cases real positive maybe metrics. that leopard's this sort Jeff. say we're longer of obviously just of how may impacts you Maybe and us ASF quickly flow Elanco’s others, Anything on markets if Give with negative Europe that and conversion anything could obviously in at lot or poin point color to focus to on about us thinking for respect term could but with of cash some Thanks. be could emerging get a cash on we terms respect focus perspective of framework seeing for at business, lot the help flow at leverage position, a for all in cash this position. and you and just that

cases me have Yes, ASF. let that start still and with spotted industrialized Asia. popped We so again, up operations there is, in

the positive instance, I in ASF Asia. as do Europe world, East XXXX. Europe, again, of and especially any noted a a Korea, commercial you're see wild we here China. anywhere effect in but pig in in fundamentals the For seeing recovery again, market. be at we some but cases on us That risk that again, in to this again, will South not tailwind Germany no see mostly the the mostly we want go And to into emphasize really been boar The material in in time, point productions for in

no effect this for business. we've in material assuming our not at anything point so European we're and time seen pig And that

months, cash good working we've the respect last DSOS QX about conversion, few bringing down instilled the timeframe. discipline the capital With to considerably since we feel over

different sheet, order systems on payments about I process working business. bank the look countries one the bit would our sides both two are little that at leads capital we continuing in accounts of the across chew of manage. on something as efficiently business of separate operating in to the of ERP will that the does to balance inventory on own to more in We working QX. need things multiple but is our up to here say in on focused on a cutover go grow have to also sheet, inventory system we're balance trying result did our levels. and a We're we QX cash through IT We

lot items. of these So numbers a IT XXXX inventory do get past better we in related expect as that

Investor So get we'll December. again, into Day more on growth the expectations in EBITDA on

Next question, please?

Umer Your Evercore. from from Raffat next question will come

is Your open. line

Thank the in. you. June have, to distribution I strategy the livestock outstanding, thanks international distributors end of livestock? did to to guys, of September? how ex-U.S. drove trying is of squeezing many exactly for Hi, could strategy as you of on me And wanted international that months these end the had focus understand days if products distribution and issues the I'm ex-U.S. do sales with remind for anything of what us versus tightening which And

same customers No, QX, that the QX, not large all. I and and protein. the the with shared, and was distribution all Producers U.S. and Internationally. inventory directly our at at the factor in at in international levels of Again, was are out of as is most remained our a results. coming globally factor Yes, Elanco mostly wanted we

makers? buy that ahead incentives these their large they close, of additional quarter if protein do exist Jeff,

right again, some Very, we've a out while buy an QX I the levels, in QX price But those globe, and very QX program out good the as to little not moved that to those re-emphasize in is But none. feel want is and prevent any change. mostly And in factor. QX when across again, case. place, to were they any from is levels very about or ahead. that changes. increase the same sometimes of allowance there's Once a that a inventory in of at Not

Thank you very much.

Yep.

question? Next

next your question will UBS. from Jacob Navin And from come

Your line is open.

Jacob, Navin me Yes, guys you appreciate, you fitting in. thanks.

expand question - inventory. on So to want the just last around

your to hand things. standalone inventory how where buyer in you're because for know want you and simply, very or alone in as side well “around out animal more the days companion If Thank stand months inventory. inventory” portfolio hand seems understand on standalone you on Elanco weeks any surprises much. do hand on we could forward you Bayer the just not for side have or please. it the reduction your livestock is many the just but called you provide U.S. as quarters portfolio things, companion don't have for exactly livestock, Bayer I of levels try so of very in for and

retailer QX. said inventory material impact we that and QX us versus is of end we If we, side, which about that inventories and talked inventories the our to Amazon’s change on as consistent Navin the Covetrus as QX more as are drives at a hold revenue we an to in very we'll distribution, disclose but the and side, the respect we well given not given the upfront will there be did the that continued talking put in as uptake the behind on We're not With in about Seresto aren't inventory. as issue it. those NW clear the products, as Eyes Bayer Advantage rather, right? well on is COVID, they and clonus be Walmart's that and side,

another in As increase a QX. we here think in XXXX that's we million comes XXXX, $XX of $XX said, million that's after about that compared to out

it. relationships portfolio going distributors so up that feel the We we business of the into operating Bayer year part it relationships our on that grow in broader good change our to the earlier you've keep set both we and levels, talked very and had International retail QX very business extensively about And OTC XXXX, that product the brings. business, across outlets this as the call good now as strategy Bayer U.S., as the and about the the they're feel inventory in with across and we our enhanced before with well got but about

much. you Thank clear. very very That's

for up Elanco Third it wrap we’ll Quarter for you that, Health, Call. joining Conference Animal Thank today. With us

conference call. conclude Thank will you, everyone. This today's

disconnect. now may You