Elanco Animal Health Reports Fourth Quarter and Full Year 2024 Results

• Fourth Quarter 2024 Financial Results:
  • Revenue of $1,020 million, decreased 1% on a reported basis and increased 4% on an organic constant currency basis
  • Reported Net Loss of $8 million, Adjusted Net Income of $72 million
  • Adjusted EBITDA of $177 million, or 17.4% of Revenue, including an approximate $7 million foreign exchange (FX) headwind vs. late October rates
  • Reported EPS of $(0.02), Adjusted EPS of $0.14 including an approximate $0.01 FX headwind vs. late October rates
• Full Year 2024 Financial Results:
  • Exceeded innovation revenue target at $461 million
  • Revenue of $4,439 million, flat to prior year on a reported basis and up 3% on an organic constant currency basis
  • Reported Net Income of $338 million, Adjusted Net Income of $452 million
  • Adjusted EBITDA of $910 million, or 20.5% of Revenue
  • Reported EPS of $0.68, Adjusted EPS of $0.91 
  • Net leverage ratio of 4.3x Adjusted EBITDA
• Full Year 2025 Guidance:
  • Unchanged vs. November outlook except incorporating estimated FX headwind of $110 million to revenue, $45 million to Adjusted EBITDA, and $0.07 to Adjusted EPS; continue to expect accelerating organic constant currency revenue growth to mid-single digits
  • Raising 2025 innovation revenue target to $640 to $720 million
  • Revenue of $4,445 to $4,510 million
  • Reported Net (Loss) Income of $(25) to $7 million, Adjusted EBITDA of $830 to $870 million
  • Reported (Loss) Earnings Per Share of $(0.05) to $0.01, Adjusted EPS of $0.80 to $0.86

GREENFIELD, Ind., Feb. 25, 2025 /PRNewswire/ — Elanco Animal Health Incorporated (NYSE: ELAN) today reported its financial results for the fourth quarter and full year 2024 and provided initial guidance for both the first quarter and full year 2025.

“Elanco delivered a strong finish to 2024, achieving our sixth consecutive quarter of organic constant currency revenue growth — with the fourth quarter up 4% — and building momentum as we head into 2025,” said Jeff Simmons, President and CEO of Elanco Animal Health. “For the year we grew in both Pet Health and Farm Animal, in our top five product franchises, and in nine of our top 10 countries, all on an organic constant currency basis, demonstrating the broad-based strength of our diverse portfolio. We exceeded our innovation revenue target for 2024 and raised the goal for 2025, with six potential blockbuster products now launched and reinforcing our confidence in mid-single digit organic constant currency revenue growth this year. We generated over half a billion dollars of operating cash flow in 2024, doubling from the prior year through working capital discipline. Employee engagement is at a four-year high and our teams are already off to a fast start in 2025, focused on delivering a successful year and creating long-term value.”

Select Business Highlights Since the Last Earnings Call

• Launched and shipped Credelio Quattro™ in January
• Achieved Zenrelia™ use in over 8,000 U.S. clinics, representing penetration of nearly 30%; momentum driving acceleration of direct-to-consumer and other targeted marketing in January; launched in Japan in November and Canada in January
• Received conditional approval in Canada for canine parvovirus monoclonal antibody in January
• Strengthened U.S. Farm Animal leadership: #1 in beef, swine, and poultry⁽¹⁾
• Achieved blockbuster status for Experior^® in the U.S. alone; heifer clearance driving continued growth
• Carbon inset market proven as dairy farmers earned approximately $10 million for credits in 2024 created by using Rumensin^®

Financial Highlights

Fourth Quarter Results:
In the fourth quarter of 2024, revenue was $1,020 million, a decrease of 1% on a reported  basis and a 4% increase on an organic constant currency basis, compared with the fourth quarter of 2023.

Pet Health revenue was $439 million, an increase of 6% on both a reported and organic constant currency basis, with a 3% increase from price in the quarter. The year over year increase in the fourth quarter was primarily driven by contributions from the continued strength of our global over-the-counter (OTC) retail parasiticide business and key innovation products, including Zenrelia and Credelio Plus, which were partially offset by competitive pressures in the U.S. veterinary channel. The Advantage® Family of products and Seresto contributed revenue of $85 million and $50 million, respectively.

Farm Animal revenue was $570 million, a 7% decrease on a reported basis and a 2% increase on an organic constant currency basis. In addition to a 3% contribution from price in the fourth quarter, the year over year organic constant currency growth was also driven by the continued strong demand for Experior and Rumensin in the U.S., as well as strong demand in swine across multiple geographies. These factors were partially offset by the impact of the Kexxtone recall and our strategic “do different” approach in certain geographies.

Gross profit was $519 million, or 51% of revenue in the fourth quarter of 2024. Gross profit as a percent of revenue increased 80 basis points, primarily driven by price, mix, and manufacturing performance benefits, which were partially offset by the impact of the aqua divestiture, inflationary pressures, and foreign exchange headwinds.

Total operating expenses were $381 million for the fourth quarter of 2024. Marketing, selling and administrative expenses increased 3% to $300 million, and research and development expenses increased 3% to $81 million. The 3% increase in total operating expenses was primarily driven by employee related expenses and investments to support our expanding pet health business, which were partially offset by savings realized from our first quarter restructuring initiative.

Asset impairment, restructuring, and other special charges were $7 million in the fourth quarter of 2024, compared to $36 million in the fourth quarter of 2023. Charges recorded in the fourth quarter of 2024 primarily related to intangible asset impairments, while charges in the fourth quarter of 2023 were attributable to a $26 million non-cash write-down of an asset associated with a long-term manufacturing and supply agreement, and, to a lesser degree, costs associated with the implementation of new systems, programs, and processes due to the integration of Bayer Animal Health.

Net interest expense was $46 million in the fourth quarter of 2024, a decrease of 31% as compared to the fourth quarter of 2023. The decrease was driven by lower debt levels primarily enabled by use of proceeds from the aqua divestiture to pay down debt.

Other expense was $6 million in the fourth quarter of 2024 on a reported basis, inclusive of foreign currency losses and the impairment of a previously divested R&D platform, compared to expense of $34 million in the fourth quarter of 2023. Other expense recorded in the fourth quarter of 2023 reflected the impact from foreign currency transaction losses, which were most prominent for our Argentina subsidiary, and also included a $12.5 million accrual related to the previously disclosed SEC matter settled in November 2024.

The reported effective tax rate was 84.5% in the fourth quarter of 2024 compared to negative 11.1% in the fourth quarter of 2023. The adjusted effective tax rate was 26.2% in the fourth quarter of 2024 as compared to 39.7% in the fourth quarter of 2023. The tax rate in the fourth quarter of 2023 was negatively impacted by unfavorable discrete tax items.

Net loss for the fourth quarter of 2024 was $8 million and $0.02 per diluted share on a reported basis, compared with a net loss of $141 million and $0.29 per diluted share for the same period in 2023. On an adjusted basis, net income for the fourth quarter of 2024 was $72 million, as compared to $39 million for the fourth quarter of 2023, or $0.14 per diluted share, as compared to $0.08 per diluted share for the same period in 2023.

Adjusted EBITDA was $177 million in the fourth quarter of 2024, an increase of 7% compared to the fourth quarter of 2023. Adjusted EBITDA as a percent of revenue was 17.4% compared with 15.9% for the fourth quarter of 2023, an increase of 150 basis points.

Working Capital and Balance Sheet
Cash provided by operations was $177 million in the fourth quarter of 2024 compared to $157 million in the fourth quarter of 2023. The increase in cash from operations in the fourth quarter of 2024 reflects improved net income (loss) and improvements in net working capital.

As of December 31, 2024, Elanco’s net leverage ratio was 4.3x adjusted EBITDA, flat to September 30, 2024.

Financial Guidance
Elanco is providing financial guidance for the full year 2025, summarized in the following table, subject to the assumptions described below:

The company anticipates a headwind to revenue of approximately $110 million from the unfavorable impact of foreign exchange rates compared to prior year and since the November earnings call. Excluding the unfavorable impact of foreign exchange rates and the aqua divestiture, the company continues to expect revenue growth to accelerate to mid-single digits.

The company expects operating expenses to increase approximately 6% year over year in constant currency with strategic investment in the global launches of the innovation portfolio. Full year adjusted EBITDA includes an anticipated foreign exchange rate impact of approximately $45 million compared to prior year and since the November earnings call.

“We are focused on accelerating organic constant currency revenue growth for 2025, with continued efforts to improve our earnings potential and leverage profile,” said Todd Young, Executive Vice President and CFO of Elanco Animal Health. “As we navigate a dynamic macroeconomic backdrop, we remain confident in the underlying drivers of the 2025 outlook provided during the November earnings call. The only adjustment we have made is for incremental currency headwinds using rates from earlier this month. We expect 2025 adjusted EBITDA to be more back half weighted than our historical cadence, with the stronger dollar and as our strategic investments in global launches drive the expected ramp for innovation revenue contributions.”

In the first quarter, the company expects a headwind to revenue of approximately $40 million from the unfavorable impact of foreign exchange rates compared to prior year. Excluding the unfavorable impact of foreign exchange rates and the aqua divestiture, the company expects 2% to 4% revenue growth.

The company expects operating expenses up 6% to 8% year over year in constant currency with strategic investment in the global launches of the innovation portfolio. First quarter adjusted EBITDA includes an expected foreign exchange rate impact of approximately $15 million compared to prior year.

The company expects first quarter adjusted effective tax rate to be in the mid-single digit range as a result of a discrete tax item that will also benefit the full-year expected tax rate of 21% to 22%.

The 2025 full year and first quarter financial guidance reflects foreign exchange rates as of earlier this month. Further details on guidance, including GAAP reported to non-GAAP adjusted reconciliations, are included in the financial tables of this press release and will be discussed on the company’s conference call this morning.

WEBCAST & CONFERENCE CALL DETAILS
Elanco will host a webcast and conference call at 8:00 a.m. Eastern Time today, during which company executives will review fourth quarter and full year 2024 financial and operational results, provide financial guidance for the full year and first quarter of 2025, and respond to questions from analysts. Investors, analysts, members of the media and the public may access the live webcast and accompanying slides by visiting the Elanco website at https://investor.elanco.com and selecting Events and Presentations. A replay of the webcast will be archived and made available a few hours after the event on the company’s website, at https://investor.elanco.com/investor/events-and-presentations.