Elanco Animal Health (ELAN) 24 Feb 212020 Q4 Earnings call transcript

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Elanco Animal Health Q4 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session. number the conference to that results call and to turning advised please are to Before uncertainties subject this and those that will a differ Instructions] materially meeting cause anticipated. management, over be forward-looking that from [Operator could risks actual of contain statements XXXX. everyone I remind conference is that would like being call this to recorded, February XX, conference I to Tiffany turn the over now will Kanaga. Please ma'am. go ahead,

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

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

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

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

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

everyone. morning, Tiffany. Thank you, Good

the Elanco around the XXXX product flowing. the was COVID-XX a pandemic results and our a pipeline and world essential the coupled historic in Elanco world, on our businesses workers Before the plants for as year shuttered statement for and labs year. quick

doubled on-time functional that systems, the home Our Meanwhile, make the on create and difference serve and Elanco telemedicine to we gratitude determination of The year the loyalty along deep Listen, world, team purpose-driven company of imagined. biggest our ago. vision journey level create customers from acquisition Elanco transformed doorstep I accomplished center, ways learnings technical our their possible. Elanco in XX who started from up never XXXX a to at transitioning from largest our and virtual to delivery. weathered And way. and shifted they have industry's on team have but for services many offices. own our a customers standing surge years and down keeping our that only all XXXX curbside a of IT Lilly strong our customers purpose a pandemic it the is delivering sales experts to innovative for my our to in past team supporting in and team and and The this that executive all company made not one our

results, enters our with momentum. strong to Now XXXX Elanco

our of by fourth US expectations. our and China high as $X.XX billion US of pet outperformed Farm the revenue surpassed quarter $XX guidance swine end Our health, Animal million.

range. EPS in came our of adjusted Our the of guidance $X.XX end high at

Our targeted driving investments revenue were overachievement margin by offset above our leverage guidance. and what largely one-time OpEx gross were in

year-to-date and adjusted are as EBITDA guidance. and adjusted pipeline full Our sales momentum our as well operational our increased revenue, execution, launches in year EPS reflected

review fourth the performance. Let quarter, detailed progressing our to before a of more me provide the highlights from

a Farm market Animal revenue headwinds our and in Health share Our better-than-expected from US reflects China US business, fourth quarter swine. Pet in performance improvement ongoing in retail COVID-XX gains

Seresto, year, products and Credelio, Importantly, key Galliprant, including compared to family. we gains the Advantage further our achieved many share for the in Health of last US Pet

the specialty, levels remaining veterinarian, at wherever mass same and they competitiveness time, through unparalleled with quarters. distributor strengthened At purchase; capabilities owners our our well, our improve with to the working buy-sell inventory continues prefer and omni-channel pet Our strategy or channel access retail commercial prior provide is to consistent e-commerce.

our execution. on We intact are raising guidance reflect XXXX our to fundamentals focus revenue and

we as EBITDA the X% Increased underlying and most later. portfolio year, to the from continue first comparisons will past EPS forecast than growth to move contributions. adjusted as Building previously higher we revenue translating detail are innovation in challenging expected X% For dollars revenue Todd the quarter. velocity, adjusted into and

first our Plus in Europe, track Japan Credelio on and are in in the in approval have XXXX US. already eight with received for innovation and We sales Increxxa launches in recorded Increxxa for for

revenue. to $XX $XXX We million XXXX expect innovation balance portfolio a to of to blockbusters will dependable revenue complementary our million time, with in innovation Over solutions. continue contribute and consistent, deliver

gross adjusted positive adjusted outperformance EBITDA XX.X% of mix on Our $XXX US as revenue Pet benefit our by achieved continued driven productivity from of margin progress above M&Q quarter fourth guidance with along was agenda. our of well. the high-end Health We million

guidance divided in This also expenditures pressuring $X.XX. categories that projects one-time exceeded it size. EPS important four be which largely into roughly operating backing approximately by outlay, nature was discretionary are our people, in can and to investments our due and However, equal

necessary other US executing leadership on First realizing and related second making our synergies IT R&D infrastructure with acceleration in brand the our with from come comp and keep accountable to senior and business aligned delivering into outperformance fourth OpEx sales We guidance higher driving incentive costs. trade-offs and China, legal the discipline growth. by for and XXXX building partnering, in third and stabilization

Health to We integrating Animal driving continue our progress make Bayer efficiencies. operational in and

million restructuring our half that believe annual total, of will and/or our approximately million our XX deliver January $XX are that projects the in drive of smaller overlapping R&D Day will total Investor value reductions $XXX a double-digit X% next XXXX. to the Our to the Productivity savings innovation the we on to growth. procurement of expected to our in our drive synergies $XX synergies. to this we of and the We adjusted way underpin X% million actions, of wave $XXX XXXX of our our a anticipated and rationalization December our With headcount strategy marks $XXX announcement expect double-digit well XXXX. cumulative capture September million annual and XXth EPS and actions. believe growth by Portfolio outlined adjusted IPP average provided revenue of growth achieved in or annual how long-term detailed synergies growth, EBITDA to million will be explanation we At algorithm In end

our XXXX X, guidance underlying the and execution positive balanced our momentum line Our fourth that me On let updated quarter. this business in Slide is algorithm. summarize in with in is today demonstrating X,

-- the for today. major Meanwhile, grow share from is traction profitability Bayer coverage double during digits line each capabilities opportunity In posted channel flea further a applying visiting one our with we're market flea which in Sequentially Elanco its declines Health broadest in park top pairing actively efforts the the achieved year-over-year. also the time. pairing Kynetic contributed and million and IDEXX ahead US status blockbuster of the XX% our the the our Credelio partially sales at tick our Plus, expectations. million in the up of increase data Plus optimizing Legacy the US Interceptor and On delivered fourth growth the with $XXX seeing tick showing partnership also Interceptor of for quarter parasites. tested used parts in brand it's with We're September dog year-over-year. retail Pet intestinal including omni Credelio focus together that quarter dogs in while shows paired now a and in sold improving gains market with double-digit with solution, cities our last positive over to dispensing reflects clinic. $XXX benefits study when five heartworm owners in products these pet The dog with provide offsetting year of has

growth a revenue in approximately the million, On global reflecting A XXXX the Bayer million related $XX up side family COVID revenue quarter, currency XX% retail A of increased counts. and the million to up earlier amidst the both XXXX X% fourth we of a The retail from the an large including Bayer year, rising approximately the is growth Seresto underlying family X% and pandemic Seresto both X% case global double rates. was that constant for global tailwinds pulled in from the channel digits, estimated acceleration X% In portion was $XX into $XXX US customer. at year-over-year from

$XXX For the constant Seresto with full the acquisition digits million before total currency and to including while the year, XX% $XXX over family period mid-single year-over-year. up closer revenue was million above the A growth was

again, and Turning the to dollar last the to safety favorable quarter compared strong positioning growth vaccines in strategy out our the In in Health the Kynetic Rounding category a differentiated Galliprant the Pet with double-digits US year in grew fourth according Pet its treatment the quarter Health to continued global expansion. remained clinic a as reflecting vet outpace year, profile data. first-line Galliprant a backdrop. in branded a Therapeutics market

through but performance continue economics, navigate incrementally value Looking our our competition Farm from better sequentially. against dissipated. backlog our to our processing on Cattle feed corn quarter par and the seven-year we US sales quarter year-over-year forecast pressuring on proposition expectations. in COVID are industry business has fourth the are to numbers lessen at Animal at Elevated and futures pressure in highs swine products. improve backdrop also with continued cattle largely feed -- on generic and recently within producer an exceeded costs

some We more competitors third in such and businesses quarter. Middle Outside demand markets clearing unchanged [Indiscernible] US poultry America, from unfavorable at our India XX% also producers conditions revenue headwinds Clynav. incremental pandemic impact solutions We $XX poultry nearly expect of Central into the countries with mid-size than seeing aqua stock-outs. impacted quarter concentrated negatively with International in pandemic challenges deterred still including million costs, consumption because reduced remain prices from with the salmon salmon poultry to by benefited barely emerging East growth vaccine cattle prices implant offsetting from and end, to like international and remain and approximately in the cases economic related year-over-year trends reduced US due and largely in mid-XXXX. we're aqua premium Brazil. negatively were production macroeconomic and as the down

for However, both species over remain important time. growth drivers Elanco

during the see of Chinese last African double health pork year's for than the to China January, turn, ahead early swine products. prices still Year. of Moving business reserves compared quarter in further pig from release trending tight state are In due to demand premium elevated the further to supply remained in swine recovery Prices New and Despite seeing headwinds are Fever our and for frozen the continued investment levels. pre-ASF more guidance. the recent we outperformance to versus to increased strong China contributing swine,

biosecurity in and and base other having herbs. success of China ASF their remain modernized in the had diseases most While are customer rebuilding problematic key our large invested in today, farms still

X; Moving to to we strategy. against strengthened execute continue Slide IPP our and expanded

innovation. each on me a the provided we X, a update few eight year. the Let touch of launches starting of planned On points, with this status slide for key

three Let on me now of focus those.

Japan first The Credelio is in in plus January.

on Medicines quarter Agency veterinary the Australia flea the pleased in product, EU positive Credelio quarter geography. Last opinion with initial season. is parasiticide week days season third reception launch our the wholesalers for paving we combination remains the it the from of early ahead time loan sales strong in European a for product track with very heartworm across remains We tick way second a the the plus in but stocked are that of the and in still for clinic received

first is Next generic approval the to swine In launches the a competitive and cattle Increxxa for market. expect EU be this US, in swine in year cattle the launched tranche respiratory market. received earlier for and the and we've disease, of in product Increxxa

a and care analytics is to quarter. environmental our we offered This see balance overall provides competitiveness. which valuable delivering cattle. today's our evaluation of Knowledge its and include kind the the our industry-leading performance product beyond sustainability This Animal Increxxa and from is will cattle continue stewardship first Farm first production to has finally full and gas have flexibility will support freedom existing services Experior performance of to We emissions we managers reduce it system by portfolio that ammonia to as while Elanco the also to with first end adopted the business by Animal on complement our Experior the respiratory And results solutions. data been have expect and to Experior and feedlot technology. processing indicated

week Experior, Canadian last launch. the second we the Additionally, market, largest feedlot received will approval US which for complement

average X expect a at our growth, to annual algorithm. X consistent contribution driver Looking programs we of long-term are key deliver percentage the point pipeline growth advancing to development that reliable representing total we to a

since XXXX. Elanco XX XXXX portfolio; or grew Moving in acquired now products X% the launched to Legacy

Details have and our sales are related to despite pressure. slide in in which the years many COVID appendix divestitures XX transitioned drive innovations these our Excluding into XXXX brands, and included will recent come. growth of on focused

diverse We world's the geographies are a with balance a Elanco history value durable point at maximize allow in species outpacing animals strategic on growth to in and our deliver portfolio the now us any one and sweet in growth industry of with robust access global to double-digit market. retail leader brands more across our our is our growth US the Omnichannel enablers sales we're and spot key expectations. e-commerce and leader the and will

avoidance has in delivered our $XXX surpassing out cost expansion expected gross a million performance. margin savings on in most our recently $XXX Since cost team and XXXX million, XXXX. the in avoidance and and organization Finally savings the contributing $XXX quarter to fourth manufacturing million productivity, captured

We onto transactions. Elanco Elanco employees have historic centers our shared also legal newly our facilities moved IT Elanco in We've of executing system, our our our network all and infrastructure. all Malaysia transitioned of with service entities our onto Poland financial own Legacy new and ERP

result Lilly March. the of effort at global this of we to on and material have time all plan a As exited end TSAs

Elanco summarize, momentum. XXXX strong is me Let with entering

US ahead were We're has the was guidance results Health farm key share retail fourth at China bottom in sequential or fourth and end Our products expectations. exceeded Animal and the quarter while business top in running of is quarter. improvement swine on strong high seen US the Pet our particularly both gaining line.

received. pipeline of eight final without year confirmed. only to yield track now And nine a innovation the Our with two on approval is launches this geographic date out XX approvals

productivity action with along Our capture. towards agenda is synergy rapid intact

on results have and turn guidance focused to against I'll outlook. execution today. that With to the our color we raised are full-year call provide more the Todd XXXX We in that, ranges on

you our financial our reported Jeff. income XX net appendix, XX made X to order Thanks, in find summary I'll slide and a measures quarter adjustments can share. on to fourth summarizes trends insights to Slide per earnings arrive results reported the the including On of adjusted the my provide our results focus business. adjusted our comments to our at in presentation. in on the underlying

year-over-year in quarter for on So the earnings our a year description please are changes of included reported fourth full in results refer release our appendix detailed today's Details full-year the to earnings of press and results. also slides.

gross to our in key Animal product QX XX% the of XXX and the negative in in legacy Health quarter slide price Total was absorption revenue quarter, is performance addition adjusted that deleverage Elanco's revenue Animal an the in higher revenue Looking swine. in total business moment. Slide improvement by in business. lower lower expense volumes percent better year. recovery US productivity partly China fourth inclusion our the by The Farm operating last strengthen at production portfolio guidance mix Elanco the and positive of versus margin a fixed measures Bayer's cost on digital provided gains, fourth quarter the as the breakdown increased basis margin ongoing on we on Elanco. of range a the the legacy basis, the in driven and we was including XX.X%, X, anticipated driven you the will XX% continued of offset improvement December. business results of X Bayer Bayer increased magnitude than Health drivers effect US revenue of points retail representation The for a of the pet of of order increase was On by foreign compared a impact In a see a the I'll reported growth on exchange increased there neutral.

increased a and year-ago from this As in period period to expenses percent our XX% of operating sales, in the exceeded XX% guidance.

equal expenditures are that this explained, Jeff expectations. four in impact of terms categories in performance of of size exceeding roughly As reflects our the

investment digital with our momentum enhancing revenue First, in future supporting in Health China focus of and capabilities. on Pet US in growth support our the a good brand-building

discretionary canine December to such key R&D Kindred Second, with development with bring agreement of and acceleration its herbal therapy virus Bio development business transactions, our kind market. to as projects investment first in

being expenses. would provision third compensation At tax decline in income incentive operating incremental QX or adjusted in a elevated the operating rate our expenses the as return Slide bridge outperformed the and high the reflecting from guidance performance margin investment end one-time We With EBITDA depicting QX discretionary million. largely XX.X%, the the either end The or our will fourth, $XX guidance was from our sales this effective And XX% operating higher net our actual X%, legal adjusted was nature. bottom IT decreased of adjusted EBITDA million On and our QX to Third, income related stand-up described. for high quarter, above XX.X%. costs. expected by still outperformance this XX, true-up. walk just of million. $XXX Operating XX% you but other that stabilization the and decreased find reflecting I our $XX.X range line, between improving revenue at our $XX million characterize

the by On discuss closely. will XX, category. and Bayer reflected let's of see million The is of the our Slide XX, revenue Bayer and contributed breakdown effect Slide price, in from of acquisition Legacy performance. on a revenue you revenue volume of benefit can volume. rate in contribution Now, products the see legacy On quarter. legacy our $XXX the you more Elanco Bayer performance portfolios

we the for acquisition. third closing with Bayer is to report quarter in addition to of the will we acquisitions, continue the the As when XXXX lap volume business begin typical of the of

the the value up Elanco price applying innovation X% legacy was demonstrating despite discipline we competitive ongoing our quarter of the and pressures. business, are for For the

Additionally, Slide our notable prevention Health the practices. provides benefits we breakdown Pet as disease tighten US international vaccines in XX price operations. a we performance pet to US of experienced health between overall from promotional and continue our our

fourth Health This addition performance revenue additional remodeling contract slide well are quarter a as by of outlined with Pet with providing on representing all were geographic materially that mind of combined major have combined our revenue benefited by Bayer. Day Animal, species, disclosures, company in quarter midpoint on Please we this the basis. assist manufacturing, of Farm estimates Slide as depicts country. to based revenues the our guidance update XX keep Investor further of To combined we XXXX and and this an reference which which by correct. quarter all from are

due However, certain to actuals. to differences non-material may numbers some FX including these data limitations have

We context a to investors. financial combined providing numbers are faith as summary to these good better give

shortly, forward into will [ph], revenue by report our to going plan species XX-K XX. reminder, moving intend on we We update by to file a As country annual revenue but XXXX, quarterly basis. Slide an to we

Let we With XX million quarter cash quarter $X.X days our is debt equivalents and at fourth XXXX. cash billion. in on continued days our at peak $X.X sheet. me all gross terms US few debt to with distributors XXX consistent held XX day outstanding, on capital, billion, and in QX payment $XXX first We quarter, now leverage. the fourth improve sales working offer words ended QX the the of with a and days of the versus our In debt standing net sequentially, of balance in the

progress our anticipate goal being the leverage towards repayment of below million to times XXXX XXXX. in net by of continue of X gross We with end debt $XXX

on related As revolver $XXX our our SAP manage we to cutover January intercompany related a implementation, did early result draw in million liquidity. of to is system

XX. $X.XX adjusted of billion. of good $X.XX anticipate EBITDA leading and increasing guidance $XXX will $X.XX XXXX starting quarter by adjusted outlook, margin updating EBITDA year and billion we our to to entering billion I XX% $X.XX ranges on to first full million now and slide Now, for XX% of are We XXXX $X.XX the to revenue, adjusted Today EPS. the momentum revenue billion adjusted billion, OpEx to to gross year XXXX reflect to total the full-year transition our

adjusted The our is expense Our rate QX a were US tax depreciation, our our GAAP from valuation mid-December. are $XX $X.XX interest allowance higher to through unchanged required of revenue to assets assumptions $X Within our million from driving guidance operations. XXXX we EPS outlook results, and increased of flow a against from deferred assign tax share.

same bridge to by CapEx revenue cash the net while anticipate discussed XX lower $X our raised to the a and from combined Investor the guidance. Day XXXX XXXX at taxes outlays, continue also view cash refreshed as We our offers million. are Slide of

Importantly, forma and are despite generic pressures portfolio ongoing the we growth, continue given exercise. combined X% X% today, combined pro -- not and around expect that to below and revenue poultry items headwinds in a entrants XXXX for provide innovation to macroeconomic we providing from challenges data to limitations international competitive the company line

Moving to first guidance of Slide XXXX. we are for the providing XX; quarter

expect and of We $X.XX revenue EPS billion $X.XX of adjusted billion $X.X to to $X.XX.

Now, to back I'll Jeff. hand it

Thanks, Todd.

we third Before share moving trends half care will lead. as that next pivot areas our to we impact ahead. relevant perspective on industry this climate first that. a is decade, the in where on often changing touch this first trends become like Elanco it's second to three is key to are believe believe pet And in to policy, and landscape; into innovation. of the that industry being key the do I'll These continue Today, make we we will years the will decade; on meaningful questions,

dog e-commerce, is veterinarian never for togetherness of our to driving even in auto an more before from increased spending, pandemic; care of into two-thirds specifically, and First, More long an more. pet to growth omni-channel term. mattered companion expectation increased and changing emotional relationship owners pets pet it's shipments. the of clinic presence; visits is landscape. translating the their say an care This than than More the with

bridge The unmedicalized, the and our shifted leader. omni-channel the opportunity of pet as Bayer of creates access With expect drive to the half positions over about tariffs about to COVID pets still pet care all Elanco continue to During that. acquisition long-term. to their owners increasing an be nearly increased online spending the million world's one-third XXX

as zero use. If Animal we alternative want will with our trend a to committed as of from Elanco portfolio ability climate we must the Farm reduce OTC greenhouse to any where producers' watch achieve. on impact forges the We protein livestock animals innovation, be are products, the value-creating omni-channel lower gas healthy could production, in towards proteins emission leading to emissions farmers the is this invest expand of policy. this production. to of digital, part like into X% in on partnerships The upcycle food not growing it actually market journey emissions. to about is pledges. Cattle gas sustainability agriculture Today and care. connected rangers improve sustainability. significant of decade sustainability US purpose innovation the gas critical and our vet solution, the is the head portfolio are next we Elanco's next greenhouse trend net responsible The generation of of and the often byproducts partner leading named the can't and But animal greenhouse culprit helps solution and already emissions. They grass, is healthy humans for problem. livestock

this can We For and it this zero example, leads in industry. rewarded net my footprint the XXXX. matters by about decade, X%. third Innovation which Many me trend. last do this livestock farms by it's point innovation we reduced know will production to reach

innovation of animals. a flow in global develop, fund source, and is livestock and Elanco farm era pets create and both pet partner, leader, next this the well-positioned globalize As to to and

the let line acquisition, me XXXX or growing beyond points, closing few a with driving As in creating Bayer our key business in guidance. and expectations, increased our review momentum close, we is

key pipeline Our to nine needed with is support of eight launches. XX progressing our the XXXX approvals

delivering our operational processes Our efficiency. increased optimizing and streamlining footprint

and engagement turn Regarding over from Board, finance, that, and the perspective governance strengthened as Tiffany shareholder immediate bringing to With innovation our having animal is to moderate the it health value. well increased Q&A. the expertise I'll in a Elanco as expanded Board

each. provide caller. like as from one We'd Thanks, we and Please session Q&A take you to as so questions limit the ask many question the instructions yourself for we'll first follow-up to and one that Jeff. then possible, callers take the

from [Operator Instructions] Nathan Your the comes first of with Sachs. question Goldman Rich line

And questions. I'm looking XX% be dynamic a maybe Thanks into market could XX% think the you products decline made we were starting growth more might Jeff, morning. talked Legacy the business and the think if sort you of and about on would disease taking how kind sustainable with slides at that for about go call of tightening volume correctly, imply of promotional price guess practices. prevention detail share Good as gain. maybe for this the just health, pet key XXXX. what I changes the I some then like the in Elanco you out

I So can of for follow-up what the think I you And this? quarter. Todd, about saw for a quickly maybe might just any have don't just then offset talk as guidance question sort first EBITDA the

give EBITDA? you're Thank of around first color be this kind how thinking us quarter some curious just $XXX you. on new is million. I think, I'd consensus about

big you that, QX, to driver OpEx EBITDA before Jeff that would well. to guided we've to to up good that in the And me substantially but higher Now, growth go get we let feel I expect improving we about didn't do jump $X.XX with we from mean, $X.XX sequential relative guidance, in the $X.XX trend Jeff. QX.. the about, give improvement from the see decline the as first QX with talked the the of EBITDA XXX to the in

for the guidance of the we expectations full by So today, while giving do feel as year continued that. not raise good growth EBITDA shown the specific about

the driven is know and increasing. efficiencies look our with in door share wellness most we the number Qliro it's overall not The price working Todd more volume competitiveness net on as owners partnerships behind have very also from financial is us is mentioned our underlying too strategy helping channel demand and Health, immune we and from just been you which the the our to driving we've of product I price the you in Nate, on overall demand, attention We're optimizing, But demand. the this. dogs question vets that has is perspective gross you're it's and in over What to resonating a a share we're paying a by seeing price, actually but driver tightness then when his and here say, moved was as no net are taking partners voice strong our and distribution their is are helping the first underpinning our and in financials at vaccines of Bayer partnerships and it's comments mean, right working. just and of the pet within from Pet relationship well gross would I that. We're just questions is now important change message visits I marketplace. all, limited optimizing optimized especially is the is think in this really of the the all brand up there

the The had we other divestitures that's obviously growth the thing last business. to add, Nate, negatively is animal in companion year, impacting rate with our

pulling The are overarching which we growth sales is we seeing other is is the thing part the to that note did rate. down Trifexis in of lose [ph], decline

next caller, please?. We'll move to the

Wright Your the with Suisse. comes Credit line from next question of Erin

call can terms half some lacking dynamics first should from think business, a my continuing a destocking inventory, you this the you then question how the large is, down particularly them what in and of was impact second the some of Can or in quarterly speak that headwinds, you Can And visibility in into you about it retail the control here from new pulled that launches. top Thanks. have the cost And and How what how as quarterly progression do sort think Great. much factors about quantify the And retail XXXX customer on as at those perspective. the then that also and in from of livestock product purchase XXXX on headwinds as relate at on that US. you're stocking we of of of to competition. business? business that progression? the well Bayer those to in the break Thanks. impacting you

by bigger our $XX that as of players inventory in. across With a the we've is total up expand. there the was in space, as million to product and in that in did in Erin, the retail was OTC tackle to couple one continue online pull-forward the from increase we growth previously, those. let big talked a retail as of faction dispensing there that at respect growth to retailers Overall, an me mentioned, a get pulled retail, caused driven XXXX

saw locations. also retail our being We more more of on cells the in products

that to of expectations network. on our a With by got customers good demand as retail orders. products. make all the full when We've versus higher to a is for those those they deliver distribution retailers there is time shipments news bit from players respect So

season. of continue go parasiticide the into customers they season going Seresto and to are demand with of own family And work the the good inventory retailers with we distribution levels that through as we holding to are more so they and they Overall, their feel very case control of side, what In that negotiations do want our our shelves. the general as for side. those on A versus to debt on prepared

Farm on question Erin, Animal.

low-single if overall that So predictions market the grow around whole the look market as a digit. at as the market will our you are

market, to expect outgrow that mid-single low-single digit. We to

Let me market because to in Farm do we of our us Farm increase in actually Animal of growth highlight be contributors expect kind Animal, that to the share for things XXXX. will list the

we the COVID compare. have So, first is a

year Farm of COVID you corn at actually cost futures two said, and with our As you have in $X know, customers Elanco our look we've provide with higher on at as the actually when Knowledge you value. is, Animal as business a products. And solutions value-based ingredient at as our we with more actually products we tough performance came look our out

of So Five new driver.; eight products. going our a be that's to

will products contribute they Animal our to Farm growth. and Our

to Farm note to portfolio I in we differentiate mentioned at to way significant look we in the the generic haven't our depth Animal our think And is portfolio beer in other on that the -- mentioned, adding field. to our when then and question and international your we continue expanding adding markets. access you a a other

our and especially We course, expectations. meeting the it quarter also to as continue exceeded we've is the last, fourth of China, the work And and is China then cattle poultry, but portfolio beef, in overall half and That's and a very off contribute poultry first aqua all total will international. Elanco we're global continued again strong to X% China growth to the by said and in our start. offset of

in mid-single new innovation take XXXX. and planning Farm position again to Animal low-single market business and and differentiated to a be digit good So in really growth share

we Bayer in the the where a the expectations pet the side pet business their in as just we offset $XX in XX. time did offset on last question, first Animal by have on of impact a business, going our of about on future COVID XX% COVID versus demand the $XX of US disruption of XXXX international with COVID the concerns business quarter did million into our Health grew QX result On markets channel the pull-forward in reduce the on QX Farm million the

So revenue of there, we QX. and we guidance going a the gives that's the we know deal where a we're year the greater reason needs different headed but clarity good number factors creates view provided in of QX this into here

taking... for Thanks

Next caller.

of comes Your Michael Ryskin from America. next of Bank line question with the

the Jeff, thanks I a Hey, to back quarter. comments your the for want bit. pesticides on taking questions. go to Congrats, little on

lot You reiterated in share Seresto remarks Credelio sort advantage. meaningful in had you a of of the and gains comments prepared

on are just a little of where and launched particularly triple bit share in from, I by deeper the So coming your gains, year one. of light the wondering uptick strong one in competitors a combo was

retail category, late since on it room channel, the some the had a provided for in then of have time December. improvement like follow-up upside. short signal you've sort year will trajectory. in or on and volume initial better XXXX perhaps room via more part was are of you wondering price things the than outlook were it's question, products the to just the a Credelio guide on And in to you comment the still on of times any by where So whether relatively the raised if details maybe now feel more markets the over enough updated vet you raise in that? your amount And or driven just a the Seresto the do we initially execution I'm as products, legacy the it's just further particular more we older that or you besides potentially the of on could through few go and and the

Yes, question. Michael, for the thank you

parasiticide segment only share omnichannel retail just well So mentioned, of Health lots fastest what and we market $X in would is as dynamics, continue digit, with Yes, start the is now products do with the I we highlighted from as I right share you retail products the of broadest A double and Animal growing perspective, I to by that, I led OTC door the and scripted market well. that's pet was that trend, shipped other family, to taking Seresto are in why that's one. outgrowing that that but and billion

performance Second is Credelio, to the significantly. continues grow Credelio

Plus being see the to no coverage a need the to if going most matter want significant and the is continue to two paired and products, and broadest Interceptor are We that full to to you with most you're today, you're the PET coverage going what get use Credelio. two

business we about be partially talked declines Bayer in factor alone QX. the globally, for are work Trifexis; offsetting say and the clinics I that also Seresto Offset the Trifexis. would retail also acquisition as with we in of that Trifexis say significantly the and in that is by key gaining with the vet we'll other grew this are will combination that to also So Credelio areas us China continue a share contributed some we and mentioned Todd look aspects pet going with at to and

markets $X.X So I of year about just will the mentioned our XX any plus. we today all marketplace. that, is we market we portfolio big Erin international continue And that in this match can good even innovate as feel Credelio as market year, then then pipeline a aggressively one the highlighted we very into with billion enter surpass this candidates US now to it or and the

So well drivers positioned in those QX. are the

months to their really commercial much and mid-November from approved efficiencies and see operational to our that. later on continue to team business, our at underneath worked the happening preparation to value feet are X was that really the new for we position in portfolios they that been the driving, a understanding January restructuring, and those Michael, respect get question reflected to drive guidance the plus to to Investor continued once better something are EPS full Day, from the on our it marketing from leadership Board now getting complete in driving tough that execution having is doing is first impact and execution. that line say very guidance, demand. savings are with year It's with sales with it increase have hard well as I'd the our for necessary that the the the And we top in impact members our update today. commercial be today December we're underlying always update right. but that, delivering the pleased your us, in related to as we teams XXth global guidance comes of The for updating to able are was

business. but portfolio talk really a again, impact top back of and line our as innovation getting we of of that The understanding balanced overall, acceleration year. is the the half we the feel So good launched is from

please?. next caller, to the We'll move

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

Couple morning and on Appreciate the Hi, in from color congratulations very results. the good the me. questions of deck. comprehensive earnings

Plus? also Credelio and during can developments to in factor the swine, China. you to China Credelio commercial there we that recent pace is factor year the of in function of need if help Credelio only Heartworm it's parasiticides flea limited we following exclusive Credelio the good or at on the on you up recovery earlier. ASF the right us the portion help it? of Can quantify vaccines access blockbuster, clarify you and can store of us illegal of with what this Firstly And on Xth of if the news very what on course function of see means terms market, Secondly, been a look in of concerning of this or competition discussed to broad have largest be producer a you that seems in flows recurrence coverage understand market, tick as way

So anything here? from you. up Thank

the you question. Thank Yes. for

So, looking blockbuster until that's straightforward. so market those know, think and and I all not $XXX are Credelio long -- we've that's in Heartworm, at through the Plus worm, the pretty Credelio straightforward. antique was one handle it the Credelio million And round alone, as about, know worm we did coverage. of Japan coverage of hook, and January entered you about first we whip, I'll as think really then, think over factors is the talked

and study, worms worms is we saw when at prevalence So and with you there, those especially something that not is the want series it's IDEXX of we intestinal the the look what flea risk R&D very this a with product this a pairing and study tick become in and we is, is is with why IDEXX have and that a take key. to campaign

also will speak I regulatory the that product, into is there's We Credelio that plus that just US will bringing we're play continue heartworm. out. not different to given constraints a on

common the advanced has our we there larger again, happened, have our $X share happened continued from the percentage a very the in and continues clearly the actually really between that again and of And in channel then, where market that China we're primarily So not advancing the internationally China. are cases channels. companies of are very the biosecurity where little is. is pandemic primarily comes still though market, There seeing What backyard $X.X a pigs though, this of is in new cases that's high Fever shift China business and of industrialized shy African that still herds how have our and marketplace and that's billion business swine a their little what yes, are about and surpass the see you're we a yes retail split are billion exactly has right. swine vet and

follow-up you -- you Balaji, guidance. question Can can remind you had on a us...

a just the in versus producer what because actual the saw China. outbreak fourth now, was guidance. had asking key was factors the also and backyard. year the for and guidance largest follow-up we On the and are in I Considering variation a XXXX commercial not QX guidance on was the swing

Thanks. want if had take you that. on any I to So see

pigs was and that's in say Yes, what's guidance. but processing, supply chain actual me Todd continue some can I in and where chains of again that here is to use Let processing fragmented, what supply important the up the picking add and is our most and for the the larger there some the spreads. disease would the producers then limited the cases

assumptions to But to of guidance forward. So we and have our monitor China you're with and as of overall total to on our we'll lot assess the as our this, We that, business certain it of growth cases. X% again, time go we believe going we hold we contributing spend sound. continue a this still our you and up is to update

guidance, I the the swing three to respect With factors. mean big

the First but would anytime confident to you're do we launching something and is against. we innovation requires that be launches, big in execute need products while it, don't a new changing effort and it it behavior, customer

weather tick one in talked flea attention especially salmon the seasonality year operations, the this and now flea over a about be we've and close it with pluses impact and has but on the over-the-counter also very Farm impact retail impact. is for season with the and finally and to, with minuses, as international the past COVID business, orals Vet Animal foodservice our of then would paying We're tick the counter But with business a on bigger much and so the the that's the base, very product Second and bigger the poultry.

We'll take Thanks. the next caller.

David Stanley. Your Risinger comes line with of next Morgan from question the

cadence Could also Santoro revenue of detail, please the these course discuss beyond Hi. for products Dave. Melina outlook and This for XXXX more the of ramp XXXX year; on maybe over then particular your the the you is sales contribution pipeline thank you? in in

Yes.

them them we a be come generally the to back timing. going in products time, annual would early forward. year. million a we that first to expected have loaded go $XX in of be growth slash us here talked, ramp million the in to pretty substantial these for certain so we've we've here launching growth natural expect as innovation X% in They're we $XXX of that the as with to As of of to half then, the certain QX we're contributor And the the total. over grow will to talked QX, X% be lot amount late more, expect But overall,

We'll caller. Thanks. take the next

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

my I questions. so had thanks two for Hi, I if much may. taking

for December, to amount is is from is, stock bridge retail retail for First, million. XX, you of what XX. you explain a to mentioned but that leverage revenue and something XXXX I because led I you what similar the that number to a of to back Can change stock exactly the asked not give when $XX today, in Bayer XXXX, net mid saw if which had bridge in should less revenue understand in that and Bayer was Day in number Bayer December, the Day. was XXXX I'm the changed showed of changed you mentioned a now that kind weeks us that at Analyst target the and and And have Analyst to by announced of of this couple acquisition I times 'XXs. X reaching as of of back XXXX which than trying December. know Separately, you that last XXXX

very there Thank much. -- Our any the would is is driver, if other I meaningful plus but hear the COVID, to sense you it's it's you. love inventory obvious, from

Sure, Umer.

demand the big as underlying then that One, the and need to call regarding correct in locations there. QX into our we regarding to we the as negotiations two did well going million we're that online in question other from demand go XX dispensing $XX as earlier more the that of pull-forward outperformance part product and continuing in mortar retail to a buyer play from it is to XXXX. retailers On both things the of discussed had brick seeing underlying XX the the the retail meet in led in

there in transaction longer of relative products And down across result to the underperformed XXXX, know leverage. news more pay on the US. net these that, So, underlying in to XXXX. cells be as announced all and then, good yes, and we're August that now we've for Bayer getting us to the of it's expectations we to deliver at is that our to what able It's going demand the respect debt that the on continued times the leverage; XXXX a were take time X our in net locations OTC more we with

the next take We'll please?. caller,

the Your next Raymond Wilbur question James. line comes of from Elliot with

morning. Good Thanks.

Just cash quick given program, impact was with respect ongoing to a Todd And what metrics. just provide the metrics quarter? commentary XXXX? Jeff, price conversion sure of flow business flow back first flow for your the cash from you Health earlier would operating to regarding Could impact helpful. going just positive could Just you on the on restructuring cash make I your commentary. over operating that operations for the in how question course in cash is going to Q&A color any just US understand the the And then provide be want

-- price list the of low a more a changes but the still reflection neutral it the back positive one. becomes an would second trends part in dynamic lap to that outsized actual did incremental changes given in look of XQ actually So year. as of favorable of the reflective sort increases could then or that's you've is so change And a strategy favorable GTN revert in just become to sort a distribution impact over of primarily it you in the if year Thanks. of those of that course negative begin not how

for one. the the you question, let Yes, Thank Elliot. take first me

preventative a we on was ago. one that vaccines in also for big driven driven And said couple by of segment were as the then here of the dynamics yes, price. So, the Health Pet year to by compared -- factors

targeted doing demand portfolio knew to and efficiency in big ability a to distribution this distributors price and and been. yes, with be been factor more we giving factors positively best just being a able So what factor there team, has are that has a change those here, get create and would creating have but bigger in the bigger less by the away they're and it

hold going pressure term a a test look our price continue long total guidance over to and this the lot, our portfolio. of X% you forward we on we to As

the about we've noted, million Elliot, forward We as XXXX in we flow you got on called in $XX restructurings we're that gross about out flow. will generate we've challenges operating $XXX with lost a the look on a EBITDA, of the taking will from the going and thanks to cash ongoing of down into of capital question working other and for up cost lot QX cash debt our as improvement to in from that given going that about million. large all are $XXX some an million pay the of portion cash soak require items that

be So this continue to we've is as year going reasonably to mentioned. a cash large

the and call Let out me in and big normal $X items. taxes. million cash the in There CapEx, There just million in to interest other for then million got $XXX restructuring million $XXX $XX $XX you've cash million of about items. is to is about million one-off the XXX improvement about

of that. feel we $XXX on holding confident to gross of that, with improve debt the we've our programs to amount already pay our do inventory sheet the got million balance in we're initiated down So and to ability

a Thanks. caller, more few next We'll please. callers take

Guggenheim. Westenberg line Your comes of David with next the question from

John for thanks Dave, Hi, questions. my this is for taking [ph]

about come other product strong areas and have areas, economic work for you any benefits, think do there same there you time you. think franchise we terms to of if question should one-time my environment. are like that reopening how And is, be anti-anxiety colonic well, example, Firstly, a any [indiscernible]. there's back and a veterinarian in might with macro Thank second

market veterinarians omni Yes. than in and partner to bring wants to and pet them way COVID this. veterinarian -channel owner that different places. we and have the curbside the clinic in believe I omnichannel our a normally transformative telemedicine market from believe would do risen world with the has one also things around has great ends. will starts this faster and have the service of veterinarian to tide that benefited questions. participating vet Great, the key clinic with The vet moved is from the and with into this in retail We the in shop of they industry

on only actually Farm as key costs multiple well environment one no consolidation the streams look I all from play. the that as products, I look plays can other question our But do new have performance-driven product not into to playing pet seeing significant feed and the say segments, more lot and segment we Experior without raised and that three at side, continue spectrum well add more link go if point, we to markets globally. would five the corporates, omnichannel to becoming more other clinic, and to We sustainability Plus think antibiotics on but the our otherwise, Credelio we differentiation poultry looking up. a see to at we are the to business any in point internationally, would linked with a we're the just transformation, broad see as going these some whether and US, to all So that value side, is that revenue -- there it's that net also value Farm Animal the into are to vet virtual -- is portfolio Todd's trend in I really but packaged is zero Animal at don't see I add portfolio

Our measured value goes value-based well. if and a it's customer up as

would that I So building the one in products. new another and new products our adoption be note, would the it's primarily of

the All caller. move to right. We'll next

Cowen line question Kathy of comes next & with Miner from Your the Company.

question. Thank taking my you for

Just ones. two short

long. assume digit that a is that pressured species farm talked also a to does true a single more low for all within about just that for that your please. clarification or grow and you outlook grow are the the, some First, When market, as Animal

on Second business partnering. question is

and of them Thank we anticipate of quarter, those more you. in others? forward should one was And virus there this the your that commented guidance? You any these in are going were

Great questions. Kathy.

in So Animal we a at probably the as Farm look most think as at got to regions disruption, look the as poultry expected whole the you X% as of we growth some market you we some in we've challenge into is forward, mid-size X% important but globally continued see all economic across poultry with challenge coming in look say species would be that some I the markets if that still to about talked year is aggregates.

global production as China around really US the nice some COVID we look some optimistic of you we in to balance mentioned, swine driven XXXX but expected cautiously are by markets X% well. swine, the As also other at less as and grow on around of a just compare side in markets

fully its China challenges. placements to again less in optimistic, up and seen and But to marketing to continue beef while continues ahead are expected maybe we'll stabilizes have industry that be dairy levels material we've most a to watch XXXX So swine as the US of keeping then in the us.

partnering. share So that to budget within to share as including that plus market an development then into digit will we we to come have his further acquisition XX low to to pipeline, deal, XX he continue again P&L his them we Day, adding take our platforms Yes, technology all R&D Aaron be partner our goal them to growing acquire candidates candidly is industry Kathy. don't to to become deals and our inside to on equivalents, and will disclose they continue market our launch dollars business but to and had outgrow market Investor single relative as see as highlighted

more closer those talk to about the they marketplace. as again enter we'll So become and

the take next caller, We'll please?.

UBS. the line next Navin Jacob comes of question from Your with

China thanks improvement. more want on spot the China China do you little get expect When bit impact Hi, do and as normalize exactly granularity just swine line revenue to be the a start swine taking what I the for them you to on expect this follow-up questions. market legacy the QX Bayer in on normalize. in then for And inventory there just and quick then to at XQ thanks very at And are move any levels products, inventory was normal on specifically, ELAN much. inventory., point. buildup was products they what a of prices

is government year. their dependency pigs can companies have the have Yes. farm throughout would we to prices production sophisticate much Without is wanting food companies, industrialized questions. backyard doesn't challenges an that less on Avian China you market chain the acceleration to change maybe domestic and times Great ASF the vulnerable. but flu it it in believe from. in this the the even entire in high There makes where anticipation. pig and comes start the more and to continue nothing will take see I'll supply the both Todd, supporting that's with and, that chain with second that poultry imports. back larger And question, and one, We

industry, larger much So support companies biosecurity fully capabilities. these can more animal we as an afford and health sophisticated that

what animals acceleration would on as an to starting big poultry US, continued see industry is smaller I factor and that So the transport coming is see from I already in match Ultimately by also pig another the of X led in be want farms the will I of industrialized will more overtime lessen poultry pets pigs hear point to also of industrialized a you is have and pigs. percentage but what Elanco growth factor China companies to there. contribute

a have holding expanding while the US really that with we million that aspect $XX It's thus kind the plus out growth and back to respect pets, of amount and our a in stores in timing product on just that. pull for that was online. expectations quarters. about With then they're was of about a million forward of retailers and we the XX more the thought headwind QX just December side in more product Bayer $XX million selling we continued saw in million headwind between $XX increase taken a the from XX that growth

than the So, overall being and it increasing now. would grow expect unless in for a inventory faster growth about what products create held the currently an in that demand the of right we headwind amount seen the because we've XX does increase dispensing dispensing of

side, with the inventory Elanco distribution. our On

those clinics QX end as serve distribution here end of with consistent vet the QX and as retailers different than farms that partners at end of of the So with QX. both our well levels inventory consistent are the

Thanks. end the here call operator. We'll

management to for over the closing call remarks. And turning you. back Thank

share to enter and engaging we Thank look into Yes. we forward you the the to of with for you opportunity as XXXX. all results,

concludes you. conference Thank This call. today's

now may You disconnect.