Elanco Animal Health (ELAN) 9 Aug 212021 Q2 Earnings call transcript

Ladies and gentleman thank you for standing by and welcome to the Elanco Animal Health, Inc. Q2 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Tiffany Kanaga. begin. may you you, Thank

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

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

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

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

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

Good morning, everyone. Thanks, Tiffany.

long As team. sustainable, Elanco day, term months progress globally value we our I reflect our and transformation and investor our creating on for eight since see our our our the nearly is evidence shareholders that customers,

has relatively our million. ago, acquisition strong to a Revenue sides and midpoint Our surpassed the Slide the $X.XXX and are balanced EPS in all on expectations, above on momentum both nearly Without were $XX business closing in between our now health results by we farm EBITDA the build range pet of since demonstrate revenue, animal. Bayer guidance billion performance year are the quarter December. we executing against continuing Two out strategy shown X business laid our of

improvement. for our the above more an offset $X.XX from nearly was in $X.XX Our headwind items EPS midpoint headway targets. of rate for X% X%. $X.XX X% $XX discrete by approximately for pushed due demonstrating is including discuss with XX% algorithm, term significant is million full third of business innovation long adjusted long at $X.XX was EBIDTA million midpoint approximately reduced of term more tax to toward our delivering revenue that $XX good showing a good time of that by above to This business, we're midpoint I'll our through the guidance, $X.XX offset industry quarter year flow providing entirely includes to backdrop. growth a in to million billion approximately portfolio billion. $X.XX than underlying range to raising our beyond ZoaShield, and by margin challenges than operating to gains the the guidance Today, later, X% revenue XXXX Adjusted $XXX external total which the up The

including we to year, with seasonality, in many and the moderation taking and rest vet the exit second competitive strong we're pieces the pandemic of dynamics. momentum, tailwinds the approach moving a While health factoring and ongoing driven quarter clinic, balanced

two implications and During and benefits. important term with term long near second moves we strategic quarter, the some made medium

part and build own this bolt three the our on First, and essential alongside we assets, blockbusters in Kindred of dermatology a announced acquisition industry. presence the contribute which quickly of potential bio, more completed attractive antitrust full fields Parvovirus review and provides shots on expect Therapy. We've of to securing other ownership also close this transaction transaction the the The month. Canine therapeutic goal including

EPS we're impact efforts. of to digit Todd we're journey further consistent accelerating working CapEx independent in the on decisions provides EBITDA creation, industry. in a these strategic taking streamlining our gross position examples XXXX. and our Second, the margin of Both in capital. adjusted next how manufacturing details and fit our and global three two the In we announced increasing adjusted annual from exit are Reducing EBITDA, growth moves footprint, steps sites. our improving value with Health strength build double leader Driving durable EPS of transformation. for continued Elanco's purpose revenue, Animal

execution overall competitive the of revenue Moving two favorable pet the upside now million pet but in to reaching continued industry. the quarter of health the drove for X, quarter on Slide with business guidance, midpoint the thirds $XXX approximately and for good a global the versus

As isolated since Trends impacts. by vet pet which to quarter. patch slightly survey that the clinic dog us increase This robust in trend the XX% has quarantine you million in digits X% $X.X not amplified America, a COVID households positive in the Association, traffic shows households greater pandemic. also of is know, XXXX, year's April, research XXXX double a structural ownership. and the pet many second start tailwinds, the spending increased were in This acquired Japan up pre with last run having Industry the surged nearly UK owning pet ownership of pet number strong were pandemic, a during versus the showing drove by food most cat against and rate.

Elanco's vet of key vaccine strategy real working that reinforcing a quarter pet business improvement clinic standout creating Our driver is price, backdrop. demand. health in a in was Vaccines X% beneficial and channel in the our this were

in levels inventory channel at business. US the aggregate distribution across remain consistent global with Our the and prior quarters

parasiticide. to Turning

last revenue and distribution Seresto $XXX year [ph] at down Both lapping driven million over million, in of meaningful comparison with global Second year, also a down certain retailer family increase major retailers. X%. X% faced was similar dynamics and Seresto quarter points global was stocking $XXX against revenue year's tough

US The channel full wetter demonstrates high the pet impacted in with A international across more May on We the brand's overall and and in for in favorable June broader alongside the gains Moreover, outside confidence in seasonal performance Seresto among rebounded many remain Seresto. the performance and of leading industry veterinarians. health. both track quarter, achieved resilient for Additionally, of levels consumers parts and weather data. expectations Nielsen cooler the US our year family seen OTC trends weather. traffic in the as

me add comment and following standard public Let July an practice. which a period the NGO EPA XX, opened XX expected petition day is that

We registrations confidence process. XX supported from more Seresto which strong the have full pharmacovigilance safety bodies by and than profile, robust is around regulatory in world our

and US Credelio continue combined maintain runway greater We plus the clinics, outbound clinics at healthy vet Along of to [Indiscernible] trends brand and growth remained growth alternative US well anticipated older long robust franchise vet a erosion platform or the cat. which Credelio the digit double light is across this the and see to launches brand our drove in EDI market trusted strong brand. sales of retail grow both quarter, with In especially in its Credelio international. the of channels innovation, from Cordelia defend This share representing focus retail. into Trifexis. performing than driving industry second is

to for continue through growing share will parasiticide maximize revenue we greater target of new and as the We investments with profitability expanding compete across innovation portfolio our grow global mark.

portfolio parasiticide like new Our is innovation competitive from therapeutics by plus. bolstered outperformance and international combined Credelio and both highly

US market year global VDI growth to expansion in Galliprant branded digit inset to and with the according in kinetic double posted the in the quarter second date Finally, continued share data. gains also therapeutics its

to believe labor year good by second we health momentum, we natural boom. and We with up, the with the in remainder We're constraints. tougher of exceeded of offset comparisons the is the tailwinds variables number While We're trends variants. ownership limited quarter head guidance towards of pet impacts practice into the back in potential capacity moderation consider. from light recalibrating Delta a trends quarter as opens the other with of puppy and and clinic watching normalcy vet monitoring the pet and against exit a economy

overall ahead Additionally, strategy industry, In driving alongside plan expectations. our especially we the competitive Depo brand nature increasing the the tracking and US is Innovation is performing contributions. growth in health recognize of balance, focus pet of parasiticide. to

pet have over expansion full China, We new growth outlook, term omnichannel regions supporting leadership competitive in levels of initiatives long consistent all health to established like more with digital time. growth, and our and year and generate

our now a return to animal service. protein the benefiting saw with farm driven our businesses demand Turning quarter, cattle swine improvement in food to from US, second we in business, a and

XXXX of the half also feed. from pressure Elevated benefited volatile numbers to higher the cattle costs to of on feet of half back continue extending year. and first producer The economics, likely

at reemergence they However, XX% outperformed like all proposition for value overall, fever. XXXX. least of efficiency to start since forecasts reduction to the is quarter percentage of severely our In the expect Skysis of producers. our point China third products about enhanced deliver quarter. Rumensin, and experienced business herd the down swine Hog ended revenue pressuring the Chinese The in the African likely to totally impact also from for [ph], impacts which China linkle But the profitability swine the we we still year, quarter. in growth prices a Optaflexx sow

phase Finally, robust easing lift seeing versus shifting third beginning the demonstrating from double improve Aqua prices expected, conditions pressure Quinav negatively international averaging consumption digits green macroeconomic We're are during year-over-year unfavorable poultry as on affected as and improvement. but and reduce of [ph] by shoots Salmon industry remain a the superior quarter. alternatives. orders four into the very also Quinav of our study from recently exhibiting from period timing is also to ROI published [ph] QX benefit saw ACO quarter. the up

a cautious soft remain do driven we anticipate around businesses, against COVID we comparison. improvement ahead overall While these

As are running of in launches. Europe plan execution our I'd in this and exceeding and commercial with each to the quarter eight our you in launch these progress discipline is second Slide strategy. a pleased strengthened time more track on share innovation for with and year. in health X plan X Slide above is Japan team's Credelio expanded Pet is against three expectations the on parasiticide will is Australia outperformance season. by and QX see local to Plus global on on launches I'm details IPP execution driven around like innovation around

field proposition important protection early are Packer one versus portfolio. but growing $X.X integration our in and at prevent the ecosystem and Farm potential we're and Animal strides end animal proving continued is billion international While unprecedented market. and now a being value QX. acceptance towards feline competitive different with well bringing faring Experience this us Increxxa validated status. very is market for around the achieving Packer Allura Credelio the the heartworm farm be reaching dynamic. US, experior thresholds blockbuster to for In It cat and in Plus competitive, is Packers seven product to of remains Meanwhile, days making Credelio growing is [ph] from

now have reordered customers product use. and experior expanded first The

antibiotics shield of supply market is the externally Finally leading ZoaShield, without which space. to product. we in than currently portfolio build anticipated the competitive greater our sourced ZoaShield raised facing

XXXX outlook revenue $XX reduction As taking a portfolio. however, our important $XX the to total that acquisition. $XX in impact a of this approach million confident to ZoaShield to to million Kindred to poultry proven value does year's total with $XXX million, forecasts innovation to in $XXX the potential which result, innovation remain million of we XXXX, we in our It's by pipeline the mid-June we're contributions of understand reducing bio announcement raised million not

the a and were words received Elanco so. providing Before information regulatory actions the appropriate. mid-XXXX. continue I our We on me SEC to documents the X, do relating turn few to item. and that call believe will to a channel cooperated sales say practices SEC let subpoena inventory and prior from strongly over our the On We've July

execution entire COVID thank our diligent, unwavering on global [ph] another I'd amid customers South and and times. focus Finally, our Africa With to results to supply their over in Vietnam, team in during and determine that, plant to for is lockdown, to sleeping outlook. reach purpose these to how more just color to our commitment Todd colleagues I'll to our continued hand like inspiring. mid-riots provide it and our our those unprecedented ensure and From stop

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

press release description earnings refer year-over-year the please in today's to our reported detailed of changes a results. for So

for on you annual from quarter the with five on Looking increased adjusted exchange in points legacy Slide revenue measures see basis of the X will the XXX% total a Elanco. reported benefit foreign at

On phasing the cattle improvement acquisition exposure the Hemisphere's points a and compared tailwinds season. distribution adjusting changes. quarter currency increased combined a for rapidly the second reflects to that and year. margin impact XX% strategic of the basis that XX% revenue second company The there's and Our of their pets visual had in our margin as in of in business, of and the swine drivers start of Bayer portfolio health. of represented revenue an guidance the to XX, execution May. magnitude were would happened have pet on outside Aqua. of that growing international gross was is increase Slide pro order first assuming percent halfway dramatically health also year our range XXX Remember a year-over-year tick acquisition growth at the forma revenue the provided approximately Northern key to representation versus outperformance commercial order the we Adjusted due The improvement our quarter this of animal basis US flea of and higher last continued in

reflecting logistics Elanco we Total portfolio basis legacy At XXX% last expense continued driven cutover quarter. productivity approximately a sequential outage increased There's the the $XX in deceleration to more to shift positive from of on business. included ERP described. $XX above investment The consumer discussed second quarter second phasing benefit bare for digital of price operating the addition second the just gross The quarter and shifting line and million acquisition, Elanco's finish shut the with Health and execution, I versus into includes quarter the discipline and plant some the quarter, sequential expenses Additionally, optimistic increased sequential the first down execution. of attributable previously impact XXX of investment induced effective of the income Animal cost, the by the is expenses and amount the the top million power volume our saw Animal and was into million, delayed advertising. down expense with $XX direct gains. to legacy shift Operating $XXX weather and million due the bare Health leveraging identified includes first step from and temporary the first a quarter. as impacts points margin XXX% quarter

million XX.X%. adjusted effective the XX%. our XX% our At items discrete increased XX.X%. Our above QX was primarily margin adjusted bottom EBIDTA adjusted $XXX $XXX full year Two was reflecting income EBIDTA tax our quarter the drove our XXX% rates for net to of million, and of to line, rate prior forecast

million required tax largest the rate This million The to additional rate XX%, expense. remeasurement not from the and expense. jurisdictions our First, in net tax QX impact our in changes assets of XX% increased repeat. in tax impact within in deferred several resulting where the liabilities to will adding $X nearly was UK, impact tax $X tax

Second, increased transfer by we tax finalized return number and nearly million. the to then of provision $X adjustments our price international expense

in the of half anticipate tax For XX% rate range. the back the year, XX% effective an we to

the volume in or the breakdown Legacy total rate and XX% all legacy drove representing the $XXX Elanco X%. of on $XXX contributed contributed of $XX XX% legacy XX%, reflected see or Elanco will performance. aqua by portfolios let's a category. million, see effective of you of fair X%, Now Bayer Slide our total contribution swine in revenue million performance products XX, added an Bayer Elanco. Slide the in health or quarter and closely. benefit On is $XXX million, quarter can million revenue that On the three you more price, XX, revenue, $XXX The or discuss $XXX Cattle of million volume. million, revenue from a acquisition

the third bare transaction volume to the XXXX to continue of we addition close. of the when in We quarter the business will lap report

the quarter, execution, Elanco price demonstrated for For and strategy was led competitive puzzle pressures, X% innovation, that channel continued up value the by of evidence the is commercial our and despite business applying the vaccines we're legacy all our enhanced working. discipline

and Foreign US the swine. in cattle quarter, price metal was reflecting in competitive dynamics flat

breakdown We its and X% with the Slide manufacturing a US total benefits farm management some as pressures Bayer. of addition between performance by in focus international as pet continue in in increase our and such We business outline as overall from well provides areas costs. geographic target are our inflationary as a animal observing for contract health of to XX operations. we're the of transportation revenue further performance XXXX all

to our expect XXQ file We shortly.

So prior sales QX held we moving four few to day at operating average stood offer days second XX quarter Slide XX, equivalents a balance up a let We working higher result in our the at quarter significantly cash distributors In accounts all me debt ended consistent as with words flow revenue than sheet. in million higher first $XXX capital, our the and on US the second being QX throughout receivable cash on revenue. down. day payment from outstanding quarter the with was as terms. and In of quarters, pay QX XX XX the

million We commitment of bank have come on floating notes pre to debt $XXX refinance payable due for million of secured XX. senior our a $XXX additional rate that August

We balance XXXX. revolving the times our facility we with X.X December of to fund on of from will our XXXX original bio Kindred our use acquisition. projection end net the in expect sheet line for draw at leverage and cash credit Consequently,

bio footprint adjust impact months manufacturing million million on acquisition, the the impact XX. Shawnee we impact EPS XXXX, sale. the like on to from last guidance to a discuss of of we the the adjusted did bio on announced to With EPS when million effect acquisition $XX net X, remind respect million was an I'd of reported contract for the $XX million XXXX the against divestment. $X EBIDTA we approximately headwind and EBITDA second to This expect close the approximately Kindred We everyone impact Kindred June loss announced Please $XX expect of our five an year. June this $XX streamlining continue confirmed programs. slight revenue in in impacts results in for from anticipate impact the I associated not full to do removing dilution release and this X, depreciation. sale million the as a morning reflected execute KindredBio's for including from XXXX Kansas the our guidance, R&D our August press we to Before financial We side manufacturing to $XX year of both to GAAP refer this we to quarter and

Now I Slide transition XX. outlook a XXXX third to and will full starting year on quarter

quarter, proximately the company $XX phasing. refresh growth portfolio. reduced expect impact is million outperformance revenue $XX offset to social for XXXX a for or XXXX of loss to this We opposite $XX revenue. are total from $XX raising including To the and reduced XX and outperformance. EBITDA EPS view our million our our the our second of by in our We year exit. guidance. number range full Slide to guidance in our bridge This the including now revenue of the combined of and from revenue from Shawnee for In quarter outlook in facility base year Aqua offset order now billion, new last through anticipate XXXX revenue comparison million in $XX XXXX billion $X.XX update partly factors, million on by $X.XX for we update outlook to manufacturing updating contribute contract Slide walk June the XX, May flows increased to second of a innovation million

a we debt. underlying and to X% X% total year anticipate the growth result, approximate X% X% for As to

$X.XXX billion based $X.XX XX.XX X.XXX margin we and $X.X EBITDA Slide expect gross of billion XX% to billion. XX, to adjusted at of on to Moving to billion adjusted OpEx

QX negatively been range the including associated reduction gross our change and pressures expense bio, For Kindred of to $XX. manufacturing depreciation expenses inflationary on supply $XX EBIDTA adjusted increased logistics has impacted to also outperformance reflects chain. of by the The offset nearly mostly margin our our million rate by impact assets our and with assumption,

Slide range. year reported adjusted growth continues Our opportunities. the our incorporate provides spend XX guidance full and forming strategic pieces EPS and investments and to moving commercial update

from in May $X.XX cantered for impact EPS and bio, factors $X.XX items Our inflation, from in lower and than the affecting elusive discrete is $X.XX phasing, QX. of which adjusted Aqua tax $X.XX $X.XX range outlook the the ZoaShield discussed from of logistics

the QX We $X.XX are XXXX and flowing a from of to $X.XX. operational execution outperformance arrive revised of $X.XX through guidance at to

balance likewise well the fundamentals the manufacturing $XX earnings up the from business demonstrates approximately outlook in second million the allies flows approximately bridge magnitude quarter this the by and write in impact decreasing million in as Our Through year. $X.XX our reported stand sequentially to of quarter outperformance reported strong remain as underlying of the announcement. through from the of EPS the items quarter. are first to from The down integration streamlining XXXX $XX aforementioned

third for of guidance Moving XX, XXXX. to Slide the we're providing quarter

billion We EPS $X.X adjusted and expect million of $X.XX to EBITDA revenue $XXX to $XXX of of million, adjusted $X.XX. $X.XXX billion, to

sequential a the from and company in of year as is Seresto just the which under step first outlook, in first on in occurs reflects over XX% of revenue resulting the down Remember call in Advantage family May. of Our half revenue the combined our year half our of XX% detailed average. the the seasonality the quarterly just of cadence

translates contribution to the Given an our well. half contribution, of as outsize to products the relative first and EPS these revenue scale margin timing

Jeff back closing headed to Now, for comments.

the drive line. our growth, of by food head ability streamlining top Thanks, strong manufacturing of and since strategic of to double into with the routine with acquiring footprint adjusted Bayer EBITDA long track adjusted EPS our Todd. the extending of actions animal digit with on driving half XXXX results and year steady term through Kindred growth is To in summarize, bio, vision and record sustainable our expected confidence life. further Elanco delivering and execution health We acquisition anchored moving on the companionship and back our

plan R&D velocity our with above portfolio revenue algorithm are fundamentals robust resulting growth Our in pipeline core and to tracking in XXXX. helping

capture. Our productivity agenda synergy continues towards to action rapid deliver with

forward of in instrumental has new IR she global transitions like to during team Tiffany express to With an our heartfelt Grissom it turn to and look a our as Q&A. been her a organization. the impact Katie I marketing IPO, the I'll part role the of the you moderate to journey contributions commercial I'd to thank Katy that, since in over finance, to Finally,

from with of America. [Operator Instructions] is Ryskin Michael Your Bank question first

of the Hi, guide thanks morning. rationale to the question summarizes in And in I methodology Slide for the sort early the from taking this well. and deck want on I start really your think year. XX

You situation And early read EPS guide a in little year, where most one on times the disappointing. solid a of now number lowering this that's it you're recently adjusted quarter. despite May. Obviously, adjusted the second EBIDTA or

So more in moving big it'd the be I'm all just and and to update logistics the you for the wiggle approach more old wondering, a issue pressures? digital pieces know, some given the pieces room inflationary the costs more prudent the new market, with and and things the conservative of underlying take like in

when Mike, providing trying have appreciate consistent the the question, most to best we've time we guidance. at information been and the get

provision as a in performance that adjustments. EPS UK, that the over impact of us return we've tax law those slides, have deal, to we as to when the about EBIDTA, show Kindred as plus provided tax on did despite well bridges we $X.XX in EPS did the those QX the the this the as manufacturing, the clearly in rate from and items as key we've rate had in well as of result well that to of know, try changes are impacts factored cost You streamlining our some the the as QX

business. very we've been with underlying in overall, pleased the our growth So

something You would play had on contribution thought one the of we're know, our forward. products very start previously we big res still positive, our than faster that's antibiotic is the as portfolio the portfolio the supply. off going now from do without differently out communicated, in the with noted, we we growing associate is which confident Again, at that a year,

we're teams pieces. in again, overall, half be our the expected of May trying than the or offset clear back slightly jumps on on line in we Elanco inflationary portfolio total side And second some logistic So as on is the much of very better by to managing. moving

Umer Raffat from Evercore is question ISI. next Your with

my expect into been they of you What be Hi, guys, specifically done you past? looking the so inventory resolution a prepared process your any Could do in the Jeff, the for to other alleging? in thanks practices. comes that at SEC SEC more? a taking remarks, as much investigations you on is are expand question. bit companies what's observation on multiyear least with this And before sort to similar mentioned

you for thank Yeah, Umer question. the

prior proper when just me I the will of the management, what context this and And continue It providing has July the year, in the relating is as asking reiterate. to the SEC sales think channel Yes, I at And our was that from subpoena to this documents received period. inventory in on we're appropriate. cooperated so. to company myself that a and put and starting this important stage and Let do to stated maybe for. with SEC. believe US one our to mid-XXXX practices And you're information strongly our were actions company

us. to voluntarily very And month. transparency we keep to that that's chose received disclose SEC we to from to with continue First, theme to ensure important is subpoena continued the transparency why last the the of

and further channel secondly, term change think today, the long a is umber make our I and to will demonstrated I inventory our cooperating the business subpoena above distribution we investigations, comment, year. SEC not able current and And compliance actions regulatory highly strategy in can value, business this focused all that details but or to expectations that or at we're driving We were provide we the can as inventory with reduced you channel the for comes And with scope provide distribution more discussed the outlook we laws. our XXXX. at we after And last say think we related teams over changed in intend appreciate sales appropriate. litigation with the continue I And middle [ph] on as and in on except since to performance, with the comment I'm shareholder strategy. transparency appreciate of our not decision don't our be our more I prior against consistent believe do to channel year practices past I which to this strategy. remain desire as of to executing this our details time, in security when much confident

Your with Sachs. Goldman from question Rich next is Nathan

morning. Hi, questions. Thanks for good the

the in called new running that reduction for launches a Just two led large new of expectations your the especially ahead on health with the the that the with for revenue pet out, the the ZoaShield change the reduction guidance year, there. to outlook million you in of half for back expectation $XX pretty products

just maybe in of how year. about I the and should could And talk ZoaShield think updated your maybe the you could also half assumptions back we variability then about if for So the the the year? ask you of Jeff, still parasiticide just $XX competition you. dynamics million on out that with revenue Thank called changing you headwind this expecting you've Are from that in some competition seen? additional

build long know, be that externally this raised Anything, ZoaShield, without on portfolio to sourced we is Todd antibiotic an medium me let in believe to a as points well competitive, just for positioned anchor highlighted, product term. first up time and you some important the back portfolio strongly it's

than let stat, and competitive another fits we facing rotations competitive what product or me has this as into an the anticipated, more integrators. toxicity than program currently currently product very on So this as play. nicely markets these poultry greater with we supply from mean, supply I set very, of anticipated portfolio It's It's health there's currently alternative way, go speak is happened. directly a leading

driving change XXXX pivot no we our confident leading Credelio Nathan plus, Credelio to I It's the out and dynamic this bio matter as know that cat new talked the And million and parasiticide term be ours so And product, our you ZoaShield we and reiterate exceeding a about older is, competition. the are that that expectations, I Innovation to the overall is to an in in we've across to from platform would is Relative a it, of the that discrete, we've little overall segment. contributions revenue value expected. new and it's Credelio very platforms impacting innovation portfolio to XXX to bit to million more is that Kindred expanding others. and some in policy it as and most remain of critical know blockbuster talked parasiticide see target experior industry, portfolio eight range outlook a and we maybe tracking that two about. our track short So this innovation to again, products XXX June growing, market playing as more on more you the brands a come. innovation updated reduced nicely nature, of even the with and nicely for want

vet of But you further, EDI pushes out polls I clinic Credelio is strategy, know, by are know, good then a come you do globally continuing nice expectations, a tracking sales, again, Seresto in very franchise the see advantages the more. and little we're Asia, evident industry I cat, doing it Retail meet things we've a new even on points mentioned to in growth our US Credelio track back, as brought expectations. international step well Credelio to pretty We has at Nathan markets impact driven as and plus, growth to little I are our XXXX bit position. in when we're and as strong So, a in seeing when our and exceeding and traffic, well I trifexis products. mentioned, know, backdrop well, you is proof parasiticide growing, and that global look and the a that in here the

pushes are global overall place pulls pipeline in a So and parasiticide. good progressing

question Your with Morgan. from Schott is Chris JP next

two Great, had much I just questions the hear. thanks so for

full remarks you there was second you're opening the view mentioned or something that it that there expectation. what's is I'm of some that the in on gives us was that of little what sure health question trends kind reflected then to half pet second on. moderation you in think expecting? just a could leading in already a seeing I'm bit elaborate And I guidance. hoping

of just think impact of much. think of the an you little quantify normalized Thanks there. a you a if from sense is, more XQ a about in so just May, getting which weather can overall, results mentioned you about how key bit we I LTC help that impacting the I the much business what think I'm us saw result quarter?

I a in I overall, would Yeah, things to highlight want want Chris, to these I say few trends.

But do visits a I believe simple know, today, changes mean, believe they growth trends here significant are of going from ultimate level the numbers move seen post believe the the gone more up to versus pet came rising two stick half. will that to positive. is highlighted, and headline we start have international, what's and what's driving we we we've as of though have the clinic gone we little go COVID at you a the that the overall We is direction globally, when market through of that it's, will XXXX average we that globally, we our growth, the second which I as that highlighted, lessen. say to reverse other marketplace, we will do traffic, and think the will year pets early pandemic. are But really I not US stick of that to have think look where the trends up the companies

think to a low standpoint that we're to we double digit seeing the growth, traffic is digit. from That maybe of So from what seeing the just moved is assuming more And moving and predicting. to sustain this we're single ability challenge. clinic that

segment, significant And is goes the that move retail market happen; growing also back in up I had to a things we see There one well is you lessening think innovation two as as a as well. you especially the little activity household. driven some pet in think e-commerce know pet market. the has know, growth, I fastest bit two purchasing

that to know with is a message saw we're May relative say going would think to is I expectations But overall question, at June. cooler saw in the we is believe expansion. omnichannel to tracking our positioned we what are well we and rebound again, a Seresto quantify this second the your for that if Elanco time. we portfolio year. the I and geo yes, to tough advantage compares don't Relative

is with Block question Financial. next Stifel from Your Jon

innovation a morning, seems appears ones push Good Todd, like the guys. it is bucket. thanks. It ZoaShield, the a maybe than $XX first of for Great, million more maybe law.

June. it's while than got you for that then gave the And color like year, going figure more you one ramp your X%. disparity it Jeff, it quarter. to think of you the we know it in Thanks, about the 'XX QX expectations. some the And on then know, contribution I I think the in why maybe year Seresto related weather XX% talk you broadly about when is XXXX the just Seresto of innovation And think is the more can it's back here? try you just have was up last 'XX year looks two better next when we fair isolate So bucket market to bucket than XQ said the greater on to say and growth up track XQ still revenue my you to just the is confidence that -- contribution to innovation circle forward. that speaking, from guys. But

the question. for Thanks Jon. Sure,

growing course You we course it the in the becomes guidance. you the getting becomes XXXX of into 'XX. contribution then we assume the feeding packer to do as expected the faster in grow. something, would portfolio, continues we'll your of yards, the life standard lay not in the the groundwork continue it XXXX, continue in noted 'XX, the can half what previously, in be from feed that to experience then once protocol standard on but integration that would just ramp as that have getting half that you innovation in But to know, That that we're second first

would a assumption that think assume contribution to is better reasonable it XXXX. backup ramp been a have into I So

on question great Jon, Seresto.

Let the overall that was from higher right have, that on the me you're exactly think we COVID tracking ramp we're reiterate highest the and highlight that the expectations just know trends, normal. the on at I level, than we came with unusual did

things Here's looking at. the we're

would economics you niche our work, especially dedicated capabilities think most And then five what we tell four increased is focus, I duration of by like product been the with last product We've four more no is and important. period month probably increased veterinarian the the the we The a and belief pet well when serving as that First that's on a research We've the from no safety. increased or Seresto. all, in veterinarians. five look done omnichannel. the owners you work to a digital and and and to one, in behind done need our proprietary advocacy know, international It's stand or of you this shows kind and know we've on has in months you cost global capabilities importantly product. at investments digital and than

for long a overall So with as with growth these, key drive can focus a independent help Bayer. that brand good versus this IP overall as at protections, of our stronger a we runway an Again, value is capabilities strong as company. we product see look Elanco, maybe

Next caller, please?

Next question is from Steve Galla [ph].

would the then doesn't the second in range, question curiosity. of XX% rates in there's temporary you. will I'm XXXX is the Thank XXXX? if If to any If then the earnings rate XX% higher true noted delivered yes, that and is delivered first from April permanent UK, 'XX, wondering also XX% to occurring tax in mentioned first the factors the of XX% tax In corporate trend just UK about in due future? And midpoint that of the part the now? unusual impact year earnings one XXXX Elanco You tax half an that delivers the higher drive the earnings rate was as increase a of but handful into of why is year. this full were be half. factors at We of of

driven The the assets tax question. the longer term for are balance is sheet thanks of Steve, by really liabilities that Sure. of the deferred remeasurement nature. and in UK the

to the And take rate accumulated at one law into tax time when balance got so that we've changes effect enacted. entire

the first happened in sales historically, the half of Seresto, with half with And XX%, in of that so has that's this of is but, close fundamental change that's those year, with to versus XX% then about as acquisition, first Bayer term reason is longer the now to on its A year. is later respect the family's the the the assets, happening the PS, then

a year in a those of dives the the that the $XXX get from impact. two into you substantially of second about know, And half you versus with the million So that, difference first EPS products. larger half year,

mix. given affect get the the from expect know, QX timing, QX, it's expected. always for business little out, of over here of in those numbers, as time clearly a 'XX you we've both growth bit That's persist that Just quarters. that between just in that of called we can we But different guidance, revenue and aspects we've timing it will our when was why

to XXXX, for we looked So know, know, expect we'd know, know, dollar you as half, percentage, of you midpoint for as of first you a that's EPS, at, know, the the similar the as full about the into you seasonality $X.XX if a we you go year. then, aspect And right occur.

we we mentioned, guiding have, in seasonality certainly some you December business global continue that called based without sales, been broad last will phasing going happen out to things then live I know, those we've of expenses, year. since the of As or a you and know, always are Aqua like

coming our well as on, And poultry. non is at to We but see time portfolio we Kindred then pet and growth with the I yes, innovation health, and but Steve, look cattle as as think Elanco. overall and over parasiticide normalizing seasonality farm moved beneficial in an this experior normalization, this you a animal real you know, at time, business, in to point the

to move caller. We'll next the

Barclays. is question from Prasad Balaji next from the Your

morning, firstly from Hi, questions me. good part two

from around could oil for I'm the Dominican on that you and secondly, ASF strength? falling And call connection you the the outbreak a sure recent region. this the ASF Republic, this do especially risk of entering and the specific could out pose around some possibilities the Firstly, the home comment there, prices. and Thanks. out want to on in commentary on expectations maybe US reemerging ASF to got developments, pressure full swine whether with inquire just not some called industry ASF I

questions. good. Great Yes,

taken know, fever, at did an to were, of just know, the noted half rates slaughter you high as Chinese we've the industry. impacted the sudden forward, in increase XX% we the know, going level we first about continues as QX overall some be a this you this our the as I in saw saw overall demand very start bio in go So business we being our and the comments, a unexpectedly production supply believe in going high pushed have Pig as mentioned. to of it our African do again, the there the just are surge all was swine we decline measures industry lessen I different that industry talked But impact, and first pork place any supply since has about point things about that, hits monitor strong that, place Dominican, of security's Latin were the doesn't industries, you that in a to I business that in this was We China. confident at when and I it right in in Mexican of we on our than If swine place will even quarter believe And the the into the in forward. half. impact the in believe by at in And have in the fever, second look I'm US on I virus as right China. time China America. material at impact go risk specifically, at African first,

next James. Your Elliot with from is question Wilbur Raymond

target about still on I sort side. in quarter, just I of integration the in here you I light XXXX but I against But number of wanted is of spending operating flow that around question there's talk it's previously up specifically at costs cash adjusted to and pressures could little sort in anything or point intact, of sort the And a follow cost Thanks. model help operating conversion flow realizing of the a net you us to lots what some those in across forward? can that associated know, conversion, capital to want are moving flow of synergy going targets cash with $XXX the just on that. bit was, was the think in any to your operating on synergies? trying million about give parts relative cash this think it just inflationary just then and that the cash working for there EBIDTA, cash early help us of Todd, sort days fact adjusted progression seeing we're to presume question synergy morning, Good focus more ask markets.

to with purchasing, January, capital to those going Elliot. reduce capture of costs. of that deliver to especially an with this Thanks impact. cash then related and the opportunities media year, doing deliver A the productivity the also restructuring large cost then manufacturing we're related very pressure for to area agency that. heads did synergies And of team spend has question. needed Synergy teams drive lot we continues tracking analysis facilities, number to part our layoffs from in from and to continuing is last of initiatives, of in the of combination manufacturing the a over all and September an inflationary the that of less finding our other well Sure,

pressure some their. there with inflationary but against as buying combined We power we better are have fighting a now company

how about So that tracking. is overall good feel

from know, with setup we're us $XX cost at that you as ERP that on from the most completed the $XX ERP only Bayer doing of system, And lower. to went getting live an million integration Bayer QX. to being well million in is cash separate QX in In integrate pleased As the the both as QX, we look system. that's we our of spend

XXXX DCS with we half talked about. the business being we're versus to the Bayer's on our of Now system savings the our we've to like, transition had additional timeframe operating to businesses then SAP looking towards, team run in for the our system those we'll do system, are we and a be integrate and use work back great by to integrate done processes, a drive that on the we HANA be lot global stabilize continuing of work new new system of to how the lot in to

respect flow, So to operating in filing play, XX-Q shortly. cash with things be those we the all will

these of QX, cash As working reminder, capital and to on like. operating flow in the with that's then and popping million. conversion a flow execution a cash in operating jumped $XXX $XX QX integration up cash items again, on just continued continued And our million of goals

on through overall those as So XXXX. we well all very move tracking items

is Nivan last the line question of Our with from Citi. [ph]

unable I come the And Hi, transportation did or Thank on good what you expectation? last product Can comment expect? also and higher and your dynamic. demand follow from up company think to cost? differed the up you morning. mentioned has higher on then the on And what otherwise, you. supply you few the specific a that

well, expected. X% product And price think very then COVID we're $X.XX I'm the the For in the are and we labor something teams other our that we as $XX on. costs small look across. with are across is as seeing opening pleased tracking expectations. up overall, in ahead pricing the at as we will level. the opportunities look dynamic percentage; to of but in a opportunities continue this manner, get come they to to the get the across on inflation a is that from to that mechanisms we're From standpoint know, some poultry highlighted. back proactive we Again, to and be $X.XX ZoaShield; how a this billion continues cost, one not for mentioned, market question, we're sure producers engrossed to we innovation of continue as logistics to our And operate. missing business that just the freight in more going different I world think, focused do from With that routes, And we're overall to dealing or there those be a portfolio so to seeing respect revenue you XXXX. global improvement This by at think own forward. out the bounce other we moved through and supply that the in issues I we trade playing we'll already, disrupted of million on we've look the continue want ways on our space, non-antibiotic or is in question the was billion in looking very

working execution as half. at XXXX. you land we Again, look course strong is all working, engaging forward in time out momentum strong we'll Good in to update Elanco. second of the of the fundamentals the is guidance and the highlighted expectations and close Thank close for good, questions first engaging over that's The thanking today. marketplace. go you third in is interest So continue for and again by and forward. look moment. time strategy we you your exceeding as extremely your the and with our today. I'll And forward where to for And we the the with half raising you and

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

now disconnect. may You