Elanco Animal Health (ELAN) 7 Aug 232023 Q2 Earnings call transcript

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Elanco Animal Health Second Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

of you Head conference. begin Investor Grissom, may Relations, your Katy

morning. us earnings quarter joining you call. Elanco Good for second for Thank Animal Health's XXXX

I'm Relations. Katy of Grissom, Head Investor

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

during are elanco.com. available referenced the Investor slides The on this call of Relations section

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

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

our slides and the today measures. are focus financial measures non-GAAP release. remarks Reconciliations in today's in these will the of included on non-GAAP earnings press appendix of Our

happy your remarks, prepared take questions. to our we'll After be

over I'll now call the turn to Jeff.

everyone. Thanks, Katy. Good morning,

a with delivered exceeded second quarter of of by million top ERP adjusted and integration by revenue $X EBITDA in successful the adjusted million, our meaningful completion end by strong $X.XX. our the range and pipeline, $XX on our Elanco late-stage guidance EPS progress

to this in sequential continue revenue We expect to an the continue first anticipated in second improvement half half the with growth to return of XXXX.

revenue, our We year, and EBITDA, adjusted for EPS. for adjusted are guidance expectations updating raising the

improved achieved operational Starting on and delivered strategy. our Slide performance we Since milestones call, advancing X. key last our

from Health from products. consecutive blackout Pet business, driven year-over-year performance, ERP revenue the U.S. First, impact, and Farm in Animal and QX, performance strong excluding we quarter contributions International of improvement second new sequential delivered by the the

our Seresto the XXXX and notes completed of the of continued On are today. refinancing completing review, our ERP registration. announced resolution Additionally, we debt, we August confirming the product's integration EPA

late-stage our Canine the gaining in the markets Antibody flea Parvovirus OTC Adtab, launched in programs solution; July, made U.S. newly blockbuster differentiation and our We and tick pipeline strong EU additional adoption several launch significant in for advancing the we in on and launched we quarter, plans. saw key on confidence Next, our oral Monoclonal progress and

our internal efforts collaborations Finally, customer ESG progress and Purpose our in issued XXXX on report sustainability operations, Healthy beyond. our we demonstrating

X, marked to on financial expectations for second view the quarters. provide XXXX Elanco in reported X% performance, a now of Focusing excluding on the the two X% improvement constant X% Slide ERP the decline year-over-year between the we half a revenue integration of currency, a of impact year, of of first the half a decline. decline guidance our surpassing the in X% demonstrating from and first

the business now to key in this areas overachievement. that drivers our four Looking drove

in First, year-over-year. Health. growth U.S. U.S. half X% first Pet to the Health delivering growth year, the Pet of returned

physical high-single through price share of Both voice, total digits, increase contributed in OTC and campaigns to Family and began exceeding increase first Seresto Advantage months growth to this share execution revenue sales, year. as Our innovation, to Elanco the in payoff. units creative strong and the market improved performance. grew points gain The and contributed improve led to new expectations, our the distribution the both of total retail dispensing while grow strategy to the leverage availability, parasiticides season market six in

of engagement Galliprant. Plus deeper Credelio effectiveness touch first in and On force points the increase drove This half year. with in a clinics veterinarians Interceptor to and penetration clinic the and sales total and the vet our investment growth side, XX% enhanced contributed digital for in

for second execution Bobby in innovation this momentum continued the outcomes, an team's positive vet in of Modi's While competition launch and expect remains the from XXXX impactful strategic as is stabilization these business touch business this prepare we to points window increased market, and contributed and the U.S. in beyond. exciting improving penetration in channel. we our half

half. business. points Next currency pressure Health International X% This driven in market. in first the retail in our constant ongoing impact parasiticide Pet the of declined percentage Spain by the demand our the saw X business contribution. More retail of key primarily European in decline franchise, balanced and China we like impacting continued Credelio its broadly, growth by markets, expected increasing Japan. surpassed in Adtab geographies other full slower The of launch Italy, and year expectations, was

Europe. Our has the positioned us in market parasiticide market oral strategy well and OTC quick action penetration emerging in

of in improvement the as in to the half a expect half economic second our Health XXXX. Europe innovation second business anticipate We International and compared we leverage in Pet better environment

to moving Farm Now Animal.

largest Animal International in aqua the by grew currency strength half, driven first four of X% poultry, quadrants, the price. and Our business, the Farm in constant in

to drivers timing of of disruption of declined for in cattle the with these vaccines and U.S. regulation improved products by and business Farm second stronger year. the half the supply poultry our first second points The strong remain half, portfolio. for continued In from the percentage from demand adoption expect We These and supply, implant rotations. Animal in X% offset increased the driven Farm of vaccine X by changes expect driven remaining Experior partially the driven Animal business, by and contribution ramp we by were U.S. poultry NutriQuest. performance half, increased our new

this second innovation to positive of Adoption the first year. in the in use saw change an at on trajectory a times Experior. growth resulting which important tracking those through in trajectory driver quarter the Canada a accelerate Experior U.S. Beginning sales the in on March, quarter. as three July, we A comments of for product, few is sales remains continued similar

of the with million an exit to on existing annualized to rate focus to million. approximately continue expanding XX run at XX year customers use and expect We

be reintroduce will supply key expect programs. to area products, Maxiban the new of which narasin, antibiotics encouraged recent tools from Foods from with ionophore their animal-only solutions announcement variety products leads differentiated by the nutritionals we're Tyson to Monteban, a Finally, Elanco poultry an in-feed poultry our or these in into and chain. we ionophore,

chickens, all sustainable As the more will one-fifth a result the U.S. Tyson positive on Elanco's shift business. believe a impact welfare in improved animal net processor of and about production, we of

Moving now Slide to X.

over innovation, our and of the drivers productivity months. framework strategic the portfolio few at look past Let's

In April, we which integration, synergies. This notes, engage offered enabling internal productivity. retire the today. other to a will of and simplifying our used customer-facing accounts are program the our the ERP Among processes ability commonly business with asset provide program. in simplification completing successfully our things, completed funds we to majority First, the securitization XXXX receivable and

the onto Next, portfolio.

of raise the shift U.S. outcome very by high comprehensive the the in maximizing and robust owners. category. importantly, of Seresto, opportunity encouraged pleased as and we Seresto are view single-digit we're our in our EPA the the with to registration We collar the We half as outcome bar first for retail, wavered agency. profile positive We approach confirmed the with growth focus for For confidence pet by an a science-based the Seresto now in returning brand, stewardship see never continued the the review across opportunity of and, product. the in of most veterinarians the globally, this data-driven pet commercial the to EPA's product taken a to the the We Seresto, safety plan year.

improved We full year. the for X% a price driven at growth Next, expect by basis. last least price strong, on now be the over of year capabilities year-to-date continues to the growth with X%

increasing our commercial animal Health encouraging our investment our With pipeline differentiation, to we total efforts market partnership regarding including our progress, on progression accelerating and The adding on in force. year business. portfolio investment U.S. time. to led the Modi, Beddington, expand by talent launches innovation digital expectations on health marketing as pet our we expect the experienced over we're This the portfolio, efforts, focused is are health the with potential our XXXX leading in globalize Pet focused organization, the Tim our our in of this field and launch Bobby and strategy building maximizing

team late-stage markets Slide pipeline X, I'll major Overall, the the driving to development high-impact in on an components de from across continue in and progress update programs moving to early-stage consistent, Finally, Ellen provide needed portfolio-enhancing clinical we our exciting deliver are important her to Brabander approvals with species. strengthening as key build research projects late-stage is into moving and innovation. pipeline. advancements,

anticipated monoclonal of responsiveness and and The lives, most highly driving the our the contagious enabling is saving parvovirus is product reorders. U.S., chain for In viruses. supply a canine we one the launched dog dogs' deadly antibody, treatment already

XXXX, in demand limitations capacity due is expected, outpacing to As launch. the anticipated at supply our facility in

to coming years. million. track ramp demand support we our on expect year, are million of volume revenue This We $X $X the the today's contribution to increase XXx expected to to in up in capacity

expand bottom-line see top- as we starting However, product the both we outside time. growth blockbuster U.S. important in driver contribution over to an and XXXX the and expect this as

the review, the Drug process, approach to phased products previously, we've the potential nature predictable we With FDA of late-stage Animal Fee our As a appreciate three ADUFA, by in blockbusters. took shared filing Act. late-stage we User driven

Our our approval differentiated are the believe approve views course, generated has are to the data Today, products on data based necessary we've the that dermatology. and, process. we the subject to are JAK to FDA proud of canine share about we all inhibitor our for

veterinarians it We highly this valued progress owners. will and are be and believe product's by encouraged by pet

product the of towards parasiticide we necessary by to data Additionally, for and all potential three this, approval FDA for in have for approve August, a spectrum continue XXXX the products. path on FDA Based of half dogs, our expect first will for methane-reducing broad these our we end blockbuster the of see to all cattle. the Bovaer,

for developments our space, month, the the expected differentiation increased. broad canine With has last the parasiticide parasiticide confidence spectrum over in the regarding our

known including of lotilaner demonstrate broad will tapeworm. product seeking will Our round warm focus fleas A The other and after active heartworm internal be ingredients, coverage and three as combination it as approval, is to well ticks and product, as month. XXX% one upon Quattro. parasites, on heartworm, prevention Credelio of

and in and coverage of products Quattro for differentiated of that allow to valuable expect Credelio will Elanco our a provide dermatology, comprehensive clinics inhibitor of canine We JAK to this differentiation XXXX. more veterinary portfolio the

innovation first methane our to wide research path supporting around highly in first-in-class for body product's we will this world in in cattle the the our the the focus of half on Based dairy. approval with approval and many FDA, confident efforts reduction enable our in to the we're XXXX. on where first countries the Bovaer, to of discussions product Shifting initial

supply launch of component contract we with believe XXXX necessary we secured manufacturer, have the key a growth a contribution. Importantly,

new to food impact, to value value and create the we across As chain. by we ground are products environmental impact livestocks' reducing chain and with for aggregate the reduce environmental encouraged the from working we interest validate, pioneer are

IL-XX product the our now differentiated we short-acting canine monoclonal profile technology. Regarding expect a current relative to antibody dermatology, for

value its expectation requirements We portfolio. USDA's and the antibody remain for of approval in a result in overall data our as to our platforms. increased XXXX monoclonal U.S. the However, confident has shifted across product

innovation Our as of million our and million track confidence blockbuster our sales and by incremental have XXXX of XXXX. The $XXX million shift innovation expectations for potential products on expect to in IL-XX of our $XXX to $XXX guidance well still to for other late-stage to $XXX Experior, million, continue increased as Adtap. views by we balanced is revenue Parvo to

the have revenue our increased last and talent in of finish to line, we the our over launch investing several result capture as a the fully our our XXXX pipeline and the regulatory value getting portfolio our blockbusters months, launch our potential go late-stage beyond competitive for understand delivering in are plans confidence Over in landscape. the expectations opportunities beyond. well We on differentiation, capabilities higher evolving product and enhanced and and of

pass more the on Todd financial second to quarter results guidance. I'll it and Now provide to

and Jeff, you, good Thank morning, everyone.

a on the year-over-year description Today, changes adjusted I'll my to results. second detailed so today's refer please focus our press quarter earnings in of reported our for release measures, comments

$X.XXX $XXX quarter. revenue, to We the Slide X X% quarters our X% X. to includes business Starting ERP on we In integration, the contributed delivered of we second billion XX% estimate, in in legacy range percentage Animal from representing estimated $XX percentage revenue the shift currency. quarter, completed constant April, Bayer remain In into which a decline between detriment global a the systems confident Price blackout the point or environment. Health of the May in million, bringing Elanco in of our X an point second to quarter. growth ERP million in the

represents with currency second Outside in constant Slide flat an currency constant above this, change our base in from decline This few reported as expectations a performed estimated prior the year, shown revenue to we X% compared quarter the of decline trajectory on XX. last the in to quarters. business mid-single-digit

reported results Consistent with Slide on last provide business currency we a basis. area on our quarter, and XX, revenue constant by

the was May, price, e-commerce quarter. to Relative quarter year, from purchasing the million decline In second we Health third with ERP currency OTC XX blackout. our second U.S., an from also partners, quarter including the of the innovation increased percentage sold declined estimated revenue key supply the The XX%, point Health, points products XXXX. headwind Pet in percentage to drove from underlying estimated X% and retailer an to in XX our of guidance our the retail, in for dispensing versus disruption the XX approximately by participation estimated we were points in increased was while X%, quarter. blackout. with Pet as For in constant estimate headwind efforts ERP improved driven benefiting the retailers OTC promotion business growth $XX in of our events percentage in expectation resulting This second strategic

vaccines portfolio portfolio; saw over by Additionally, our legacy offset disruptions on several the continued we pain pressure last in slowed vaccines. share loss supply was growth parasiticide prescription in partially on quarters. despite certain has our Growth however,

Health currency, Pet declined International headwind of blackout. estimated points XX% from XX ERP the in with an percentage constant

XXXX Excluding expectations our distributors retail by purchasing of strong by impact, retailers in the and Spain followed Exceptionally primarily and (ph) demand the the conditions. from was driven first business [pressured] decline blackout underlying economic business. half was

half this of result, periods In expectations the XXXX, second believe first first of decline both in As We second our demand year-over-year in second in improvement the half XXXX. the the XXXX continued but a and was half significant will below for materialize demand a in our and in remain business of more resulting in XXXX, drive quarter, not sales consumer business. in impacted did XXXX quarter. improvements first the in of the half

Moving to Animal. Farm

global from estimated X% Our declined blackout. the business X% ERP with headwind an

underlying for aqua, than implant. expected to in in across the related driven the declines for quarter, Supply to third extent business offset half, vaccines disruption poultry by expected vaccine U.S. our second providing changes in and and May. we partially that, strength cattle in but is cattle supply disruption tailwind a by be to in was Excluding lesser remediated growth the call expected international a regulatory

blackout. to XX. on driven of XX.X%. included offset underlying The the income points price margin down improvement cost XX to Gross unfavorability by Slide higher and ERP the Continuing on increased Gross statement inflation. the XXX sales, margin was growth, XXX by points basis FX points basis of impact basis of from productivity favorable

million expense increased employee-related expenses million by exchange X% compared rates. $XX was slightly foreign impact by expectations. with year-over-year Interest Operating expenses favorable and of than our increased driven offset in quarter, expenses, the better to SG&A X%, R&D investment and down $XX X% expense year, million marketing partially to last $XX the up

an Adjusted $XX XXX XXX estimated the of in estimated Adjusted the decline ERP headwind corporate point EBITDA with the the with or EPS was million a from in an to first was with points rate $XXX decline blackout. blackout, million from XX% $X.XX $XX ERP to quarter with of from of a basis EBITDA consolidated headwind million XX%, margin blackout. XXX in quarter an basis $X.XX was point assuming estimated $X.XX tax quarter, Adjusted XX.X%. the a to the reduction line basis

our in the Pet driven XX, adjusted adjusted actuals. over quarter our compared second walk Slide EBITDA to to Health margin and The business. performance EPS from for higher we sales On by quarter provide and higher-than-expected U.S. a guidance guidance was

of and favorability Additionally, end compared expense. and impacted The favorable on EBITDA adjusted $X.XX the the range, from tax. lower EPS of by operating benefit interest impacts of was of also the adjusted million to benefit $X.XX guidance $XX included COGS top

increase quarter working a and inventory. The and working let few offer in reflects $XX capital me flow from interest cash interest decline last guidance, by debt cash, Cash an Slide specifically year's Before our quarter. on on swap words of second XX. operations moving impact higher cash in year-over-year was net provided to million the operating settlement, rate the capital, in the

inventory, quarters. the this over the volumes by primarily use a driven increased of on several cash sales last was result of pressure again largely Farm Inventory quarter, as Animal

We to entire are on across capital. distribution improve receivable, centers. very and collections by business, streamline we opportunities integration our reducing actions enables working accounts are improving inventory to system The improving management focused

are our benefits including new further We supply material raw actions the gradually delivery product balance also changes and to needs. sheet and while ongoing assessing are of prioritizing These product API taking we stock the certain expected deliver on implement to safety inventory, throughput facilities. launch renegotiating manage timing over of reduction contracts, time as efforts levels manufacturing at to by

billion, with quarter we XXXX our of on Today, retire of the reported million we ended revolver. from $X.XX net in will $XXX million July. the early notes drawn Form debt $XXX on X-K with $XXX as We our million due

million approximately the the with fund revolving on will accounts $XXX securitization We a from facility asset retirement and $XXX receivable credit million facility.

of ERP the securitization mentioned, Jeff enter our us As system agreement. flexibility to the into the provided consolidation

the of EBITDA X.Xx, of to At our up net leverage due at quarter, was expectations our our in the X.Xx below outperformance from the June, ratio end end but second the adjusted first quarter.

$XX increased the above our cash in of the now XXXX. expectations expect quarter, for Given pay in of second use we million debt to down inventory

net between be X.Xx ratio our will leverage and X.Xx. anticipate We year-end

debt next significant to durable continue XXXX. in from due is priority. we flows Importantly, the with obligation allocation expect paydown our primary capital debt cash over business as time The

an of rate information updated debt the in mature In after reflect of XXXX. interest Slide have we rate debt notes. May, XX with XXXX to additional that million fixed variable swaps We retirement key the our $XXX

of adjustments, of if more expect expense After by or $XXX $XX XX% compared rate interest Fed year. assume approximately cash a to the approximately XXXX, of million hike interest July to As between rates throughout $XXX to on million Federal $XXX $XXX rate and cash million of will statement debt million Reserve, no we end financing including year fixed have flat transactions, the result rate these interest. we this late the total two remain million debt a million and improvement our $XX income next this interest year to through

Slide also cash beginning our we appendix which Finally, XXXX. points expected reduction in have in in included meaningful project the XX to costs

financial XX. Now let's Slide move starting to on guidance, our

As Jeff revenue, guidance for said, EBITDA are full our and adjusted year we EPS. raising adjusted

billion constant between $X.XX $X.XX revenue decline full year, be a currency. or we in to the For X% and to growth now approximately billion X% expect

we adjusted overperformance. improve $XXX reflects $X.XX to to cash that EBITDA billion. health improved second in margin now million Adjusted reduce Jeff pet investment and the and expect quarter inventory and outlook described. expect in also we For EBITDA, gross manufacturing the headwinds throughput from reducing the sales business factors our It

are raising to adjusted assumptions reflecting $X.XX we the EPS, impacts expense EBITDA improved for adjusted For interest tax. $X.XX, our to and and guidance

On guidance the financial Slide we XX, third introducing are quarter. for

$X.XXX to growth. representing of X% $X.XX X% billion, constant to range revenue We currency of expect decline billion a growth

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

moving XX. Slide to Finally,

revenue to constant return implied and flat in confident offsetting growth half led growth, growth. poultry second of represents continued improved half aqua, guidance in the and supply from X% vaccines second for remain currency pockets Our product price, new We to competition. by contributions ramps, continued

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

Todd. Thanks,

second in improvement strong by expectations and continued I results was our and customers the to delivered exceeding our laser-focused contributing year-over-year growth underlying for reflect driven quarter thank sequential close, Farm full a year Pet contribution Animal our value return improvement, new revenue and shareholders, significant want business, the on this performance demonstrating quarter, the guidance. International Health operational the delivering from to a U.S. progress. to raised global is our team. performance The Elanco This products. in team and we around strong world As We

continue revenue momentum second of this an the the XXXX. expect We anticipated with growth to return in for to company half

era integration innovation Importantly, infrastructure now build we've an of the our and optimized growth. reached our pivot and and point standup to us next with behind

parvovirus solutions on puppies and bringing and making to progress new to team solutions from of deadly efforts some is to strong greatest cats challenges Our customers' animal cattle. to environmental transform in our our care, diabetes

made significant and we revenue on our late-stage pipeline, our enhancing progress differentiation quarter, pipeline in our This expectations. launch confidence

We full launches. this the to by of are potential encouraged and very and expected portfolio maximize our advancement the are investing

growth, focus generation. Our with cash improved delivery sustained is for innovation consistent value flow balanced outlook future a on long-term and and

moderate With to the turn that, I'll it over Q&A. to Katy

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

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

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

open. line Your is

Great. for you you is Thanks guys. to number side one question, of data going have flagged were My focus times with the a the necessary the on innovation taking things. all that for first of There FDA. approval

you hands data and us of what go that from the and case the FDA about JAK Could of the a four-month Quattro things four- Does point, case Bovaer all or the in comes it six to window way steps? for to approval, data end four think by additional no just FDA there's that's secondary and the that assuming correctly, at right request. be the months timeframe? So that through are to Obviously, now, with that's is for but then the the the August. walk inhibitor you Credelio expect What to that? after

for you. question. Thanks the thank Mike, correct. Yes, That is

is So dialogue confident here whether itself, doing they clear that the need. with the what information just we're they is very to were it's FDA or submission we be the have

commitment we products a that more today but disclosed to really reiterates builds subject these some than correct. As that think process, when have. $XXX we our you even confidence are quarter relative the is And know, ADUFA million to information to $XXX that ago, that I approval, and million additional

to those submissions broad success, our inhibitor. then parasiticide, two success, the to additional as as as Experior that, million as Adtab, JAKX be innovation $XXX Bovaer spectrum the I shared will we well that $XXX that and information want of our million base, by -- really the the Quattro, parvo the Credelio led just well And emphasize the on

going When the months, see the are correct. path to ADUFA put predictable, which the first So to four that in which window of you is that that's for half six you process, of that, on is XXXX. follow us

Thanks. Great. to one of Todd. kind that, for And related

As million. $XX the you but little a XQ over raising EBITDA only beat the year $XX million, full you called by by out, about you're

those about bit half, pieces also -- talked gross Could bridge Thanks. but a a the you half? in of is And in Health. moving what what investments second clarify little flagged on in biggest us second that spend Just are? the the the incremental the So, part bit. that Pet margin, EBITDA talk that you investments second for you through half additional little

a Sure, to things Mike. approach of executed second beat. how EBITDA deliver Thank Yes, breaking our this looking very with have you that significant quarter for across team We take question. lot and we're at business our the in a way the quarter. always pleased the past balanced

As we create term. focused and then look value to the the second on for half, to we're long build continuing

expect have. long-term innovation the that coming critical continued success increased to growth just that's we is and Jeff mentioned, EBITDA to As

time drive To we're complete about force the international but Tim to $XX building is underneath Embedded we're also marketing as investing that increasing out be Health in well. Beddington in over markets also ready team innovation. end, products incrementally for globalize that to our on these Pet the portfolio, and his to new build to team sales expertise that expansion U.S. both them million global Tim with

the bridge of quarter. for part the one EBITDA So second that's

our one good was on element slowing XX months A and board, kind API quarter to that especially million to really plants. supply The decisions advance relates to thing, is balance disruption COVID. inventory, on in have from expected a that business to across Farm products lot down QX other the we than XX of on for except increasing purchases was manufacturing to our more that Animal we $XX relates the for own about sheet. the of given chain the make

well about also that that product That's that down still is business margin lot in on to some there's it. door, We're addressing output. gross coming $XX always that pressure putting but million. mix going So, as impacting elements And shifts plant are our a other in of on the timing we're slowing and are then bridge.

by that as But quarter, U.S. business, business. net-net, OTC strong And could beat half really also from. so reminder, first business predominantly a that the come affects seasonality of strong quarter where makes our and our a

execution sales, is us to again, on by the So adjusted very year, allowing pleased adjusted the year raise EBITDA guidance and across the team full EPS. with which

the caller. Thanks, take Mike. next We'll

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

Your is line open.

balance think do much the Great. looking these me questions extending just guess that just how a I on of the investment about you the color I how guess for we earnings progression. of we next here. have and formal additional similarly hand, behind here, on help Thanks properly and SG&A I little on market? those? Could managing the assets clarity discussion the kind investing some and guess, is that so it's, to think for of question between think these on for one and incremental guidance you the kind first bit profiles maybe do then about year, we but in not as now about pipeline about need updates just much

question had pipeline. second then just was And the the I on

Quattro that about that what differentiation, see and I color profile any I there. you the could but on the Thanks market? much. fits the slides just can Credelio anything so you that the profile of look and how in provide think in Is talked JAK like there on inhibitor? mentions

for launch year up force that years well. Overall, driver to expand to we Elanco the we're investments, really starting They With make ramp sales we we're year's products growth certainly, these respect will Chris. the this marketing. that sure the to to and add Sure, as be in next come. the continuing to

going We've of to in sure make to broad got business. a those. got lot And so, short a We've not motion. things we're

portfolio provide synergies we them completion these to that addition our continue launch million to about make $XX to across ERP well. As next investments for we've does we'll talked incremental products the in in capture to year need range, then

these as the come but a So products not market. understand certainly today, giving importance guidance launch of driving to

Jeff, then, the... And on

bodies. I'd the the of engagement thank submissions, you level never any Elanco with the in Ellen quality say think the and been R&D. just level I probably the quality, team of of quarter the seen would question. And higher her regulatory engagement, Chris, think I've I the represents time emphasize, the say and the Yes, capacity this I just for the has discipline,

to we've the specifically more JAK, not into you light market, As look going put this billion on plus $X again, any term differentiation.

important. the safety, said be efficacy, will convenience I've past, in As

having think really be we're of that coming the we very of these broad para increasing Todd's to that being current differentiation in last of this of the to parvo to have able has factor level quarter, to think on para very innovation allows clinics, with this going confidence in to a of the and start the I even it noted coverage JAK, para investments. broad differentiated confidence, the differentiation, level point, significant another pain will portfolio, make approaching say and our us, some led a us on side we the now as differentiated with candidly, level lean about see vet and

first what a believe other is color at the nicely 'XX. to than no but for -- approval tracking this need FDA it say has more they a differentiated. and time to a JAK the already we're for -- additional We half on So path first half

you. Thank

please. Great. take Thanks. the We'll next caller

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

open. Your line is

Maybe couple, a may. Thanks if I taking my guys. questions. for Hi,

year-end low X.Xx talking leverage I overall of now is was net versus why you X.Xx be. but And leverage about that First, the expectation I your I'm the would previously. And understand end net to expectation. trying raised saw the guidance,

and cash I'm facility, includes of it all or to and say investments securitization fixture your to other the and borrower. personal collateral typical? understand, is the property inventory, also assets that proceeds that on for noticed Secondly, I trying And

make return getting of over we improve well in into underlying revenue Yes, the that confident half Umer, second feel with we're as to the management we net this the inventory business as I growth respect gross the continued called we're had But as down had. less we will as to year growth out, to expecting time. that the in that the pay than increase, did again, previously but debt leverage, we

This for cost of is the was in And basis rate system, plus typical ERP lowest that very us XXX then, the points inside SOFR facility financing us our having execute got with allows to by at our this one standard of a facility revolver. all enabled integration variable that's really facility. secured A/R receivables credit

been the So, implementation had done, something we've looking execute we for years standard just but until couldn't facility. very at but

Thank you.

please. We'll take caller the Thanks. next

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

open. is line Your

in little line the 'XX Good XH EBITDA guys. cadence, to the ask I'll to seems bit the the 'XX. relative front. at Thanks, weighted I more Todd, seems largely revenue with XH morning. but 'XX in cadence a believe both back-end 'XX

on sales in could have unwinding greater a that explain A Seresto. been year? of what So, this to right $XX question back maybe slightly is aided the seems an if last $XX experienced you that there. natural confidence that of quick And I percent sidebar relative million accrual that, XH that have was in quarter, you that the EBITDA? might do segue EBITDA just there for that It like 'XX million to add

would The be, That's question Jeff, Seresto just second resolution great. finally of the part there. is

you the love rate product would step back forward. long-term and that of growth Just Thanks, guys. thoughts going about getting your taking a

the second a half question. strong half Thanks, different cadence in. would last not and was factors second for year No, there's say of I John, Elanco for other nothing that your on revenue than

but the of With that we our walk of that, our adjusted enough back Jeff? the not there press that's multi-district to respect the accrual. to litigation adjustments OID in is the had, GAAP Seresto as to process release see results. in in part we're the from the can we the our results, finalizing EBITDA do you settlement in on of adjusted That

Yes. Thanks, and on question. bar We, pet John, raising to retail, it for reaffirms that We're a the happy the links on first the with the We the quarter overall the of the outcome. collars. mentioned, had a I long-term great question. first think as believe product half it's I and very registration decision. science-based and quarter, It of Seresto second really category

we look to As digits quarter. in we -- high-single growth, saw Seresto at retail, you return the for the

in and those; as launched things with out: that price; we played of it, bringing innovation are think last the some that inside look we've Advantage of quarter the physical you mentioned the that share of here availability; increased really so I the on voice. the brands forward,

We've then availability campaign. because our It's A out most on a done market. has of of for first XX% just a back grows, in actually and XX% with We market, I ever comprehensive capability Just of things. that distribution call think with increase kind to a seen grown. couple up click a share put probably half. couple Seresto. very total we've the strong and and a things, our retail been physical trade rate a campaign the were aggressive really strong And less points very down

factors. the So the is of are in believe our as as anyone I experienced team kind these industry.

share is Our growing.

at is not but matter: look share I price, in factors be physical just return U.S., today, and not globally. it's four giving Seresto but voice. guidance when these we're positive So, innovation, stability the long growth to the term, availability a going that see well We're to positioned, but term, thing long we and of

the take We'll next Great. question, please.

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

is line open. Your

commentary morning. back have Good I manufacturing throughput be type first, to next about XXXX? on plays does for the questions. there the year wouldn't see And cash Thanks so expectations any facilities. to kind for go in do free your of And the flow reduced that through from guess, implications normalizing year? wanted you gross to next gross I it you drag? margin million of $XX and that Todd, the that Can the talk margin how impact Great.

as IL-XX. a wanted I question, on then, second the And ask to,

of now added USDA can about from the Are maybe timing additional you versus I in details approval, think there? can terms around talk kind that you any us requirements led you what's give the it's the approval? what you a data there commentary to that shift on the got product differentiated of market. the And in of

Yes, Todd?

way footprint got continue your manufacturing a gross our respect the With Nate. to margins. of work first that to number to on question, items improve different Thanks, we the we've team sees across it today,

we it the gross of had strong once you back that would XX% the quarter, a here in integration. add margin quarter very You the ERP second north impact have well from seen

to So We've impact good a plants, have be this margin we It you have to got the is the second momentum, yes, shipping But to into get side. of is impact year. overall, an our Inflation feel of on driver Then, especially an Pet margin does continue certain year. respect half into about improved big productivity U.S. That areas better starting on improvement. gross next continuing. with in area doing will of the the with that it continues price. to especially highest as Health stabilize, company.

announce IL-XX, has the relative the differentiation to excited we're Nate, of product. to confirmed yes, research that

market, this fall I've differentiation leads not but Relative this that time, more and and the categories So and we that our assets go going leads the to have to change I'm take that into would -- which our at mentioned the confirms investments. to pet opportunity in an we the as are share that it get now in differentiated all investment of late-stage before. the belief to the to into

I is won't but in I an shift FDA product. again, the think get not great into USDA, this detail, again, a the expectations,

think I that's important.

really, get a really And technical great the say, So, of only though, requirements U.S. And are related oppose expectation Those I that's that fall driven on monoclonal across USDA's process platforms a will risk, the doesn't time increased to won't more into data. believe, a requirements, the it line again, of FDA an the any detail. we in I is maybe magnitude shift. it well which But of antibody by ADUFA, the defined doesn't side. the very was here shift under data increased this is

take the question. Great. next We'll

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

open. is line Your

a so maybe than factoring to that, 'XX, be question. of we everyone. launch for Thanks manufacturing little of start in a kind in you 'XX should half they first a question. sales, have then, When you maybe slightly kind the side some we're where I how a of ask for does can a progression of bit especially can margins and focus of other side kind And the more periods? what -- that on wanted new models the sales of around margin taking of the be little bit expectations are your our of Hi, on normal? you look? the little bit controlled period product talk But different when these launches Is ramp about as and to accretive? updating maybe

Brandon. Thanks,

to before to about months, provided aware, approval, But launch, today. post elements. respect we're launch, we've approval going well in four we with same not give you the get two it's quarter, we'll talk about those sorts As again, to information as labels last finalized, usually, of guidance get to

of margin, scale get those. to good these get economies you the again, on With we and levels, clearly, of feel very about prospects as respect we better products margin But all time. sales over to in higher ramp

contract respect Quattro Health and that it as than overall accretive portfolio higher to we're start. forward the expect means to a be at margins supply manufacturing Pet to the we margin the products. to higher have less will thus inhibitor, well of versus approval third-party we With JAK acquired it, going significant as at when our With the Credelio those Bovaer, pull be given that

over to to EBITDA these looking and cash and But them approved, getting increase overall, years higher. launched next we're be drive margins, getting the few they'll the increase flow drivers forward big free

question And then side. Thank just you. Great. one on international the other

think there strength? Thanks. some of macro Can in international you pockets give might or any backdrop I update weakness weakness countries. where be you mentioned on pockets of And an some internationally? the just

Yes.

well. aqua is a recovery, China, more I think on global to strength and continue do our but the meeting as not a expectation, our said, franchises U-shaped of poultry we've side, V.

We're prices confidence And remain mid-single-digit just seeing So, tracking expectations. our the we're breakeven. to China keeping still in side. swine growth on on pet eyes little below a consumer our

a slower I bit Australia. would of in little I be a little and pet of a mean, bit Japan pockets few think those a softness. of there's market

poultry of and resiliency global say, But The well. again, strength I've pet the to aqua hold. this past or America and Asia, market to quarter, continue to the traveled hold Latin again, continues I this very year of would

our well, very portfolio Animal driven the in has faring Farm is growth X% So, which International.

next question. the Great. We'll take

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

open. line Your is

Jeff, you a (ph) morning, detail thinking and Credelio And to] further around [when could Thanks Balaji. Good just for bit how you're Thanks. provide compared [Mikaela] taking Quattro details is questions. really a our any be going to (ph) everyone. Experior is on Plus? This it differentiator? NexGard more for how about on

question. very much the Yes. Thank Yes, for so. you

parasiticide business. our I look, Dog, So in warm U.S. our the product ticks, evolution just at Credelio over which the I want and largest say, first spectrum but the four building Credelio Cat, is really just active in lot round ingredients very next Credelio I would the broad fleas few Plus, Again, months it's last This Credelio outside has Quattro, And think of Credelio from the doing off and will tape $X and a I very look franchise, with canine over the in happened the globally, differentiated believe, billion. heartworm, and be, would to also well coverage competitive. emphasize warm. with is market

we And prevention one here after XXX% I be are call. on heartworm that then if information focused think month. new this approved, on Additionally, would

I and during month, would active important, that I that think first additional. and be that's think

portfolio coming a factor kind enter coverage into will believe these, well, our approval. we differentiated competitiveness in XXXX. derm will and be believe be of under play all in we But to that products. it sequence relative with this of will adoption will that It's key. the a Again, our a portfolio also broad is rates we we will and be as as in still parasiticide with subject have, It to market again, which be

Thanks. take next Great. the caller. We'll

line Westenberg Piper from David from the comes question Sandler. next your And of

line is open. Your

Can taking be outside what look might what it of a could U.S. assumptions or the the quarter. you and -- for maybe Just on think for talk the indication? parvo, assumptions this indication, needed? the color on fast of like whether blockbuster in growth maybe you some the prophylactic kind be that you a executing any job question you Thank pretty that -- about Hi. great assumptions why

question second upfront. I'll then, just ask the And

you Advantage, what on highlighted, are? strategies with if bit I and think marketing more new color much. I to you [misunderheard] (ph) a very just those give little Seresto Thank some

some Yes, off is and supply questions. a product, thank working for the stories. launching mentioned, a able that's you product chain well. going frozen solidified, the and is start, On early we're Again, in we The great amazing to reports to as extremely July, product well. being parvo, the move

again, antibody, first first our monoclonal So I our focus market. would on U.S. foremost and

doesn't we and on treatments. really seeing quicker efficacy include is And early cases we're XXX,XXX important, are this. market that basis, shelters. while we're building an So, annual We're seeing here a that. doing We're seeing

regime, of value a five and But knowledge, if treatment response success and this think product, burdensome treated, clinic our to what and quicker proposition much to the what the you're days is rate. puppies a At that's very a can recovery survived. higher a about may to be XX point vet dog hours four XX every in time, higher you So, been this a seeing take rate rate. to this have in

and parvo, the carryover seeing us all this clinics, to I about think we're the other product. access have thing because clinics for talk a to want have more is to ability with more

fared also that's So well.

is right U.S. focus our now So, on the

and a XXXX, help but give we focus capacity a as to year, XXx. as sales We're into of yes, a Our forward. head blockbuster us is then, million path us manufacturing capacity on to increasing global very And expecting product. this big manufacturing will $X $X approvals million we step-up in go that

pillars these more fiscal also on at more price I in we're availability we're come again, Seresto, just Back on the stores back leveraging both side, those Advantage, is just points. shelves by led focused on, more four brands and to retail

the we at when more brands So introduced price new Advantage points.

campaigns they've to as a another factor. innovation of whole Increasing innovation. is voice, And links then price that. another with digital Bobby, bringing targeted campaigns, arm So more and Ellen more share got of got We've and those factor.

to quarter well thing on Europe, as in we've as this the So as as we a a see significant launch share Adtab our continue applies And international we over this and to markets. whole, driver. retail, increased the same

So, that. excited about

was that believe last question. our Great. I caller

like this? would Jeff, to you So close

Yes.

with your our ever and guidance into for today of in era believe, our the stand-up head that's Again, progress year We quarter, with growth of forward coming approved, been is another above and now innovation innovations starting Seresto proof delivering these So raising as second capable our next this are to for behind ERP on ramping strategy, for on you complete, today is of the as delivering significant Again, expectations, returning into thank growth, our today. heading in see than XXXX. half our company preparing the the the we historical year. interest. and us, we that while move we more innovation are full that focus also we we've and

for look quarter. to with your engaging you We throughout interest. Thanks forward the

concludes today's conference for Thank call. your This you participation.

You disconnect. may now