Elanco Animal Health Reports Second Quarter 2023 Results and Raises Full Year Guidance
- Elanco Animal Health Inc. exceeded expectations for the second quarter and first half of 2023, putting the company on track to return to revenue growth in the second half and raise full year guidance for revenue, adjusted EBITDA, and adjusted EPS.
- Sequential improvement in topline performance driven by strong performance in U.S. Pet Health and International Farm Animal businesses, and contributions from new products and price.
- Elanco made significant progress on late-stage pipeline, advancing strategic programs and enhancing confidence in differentiation and launch revenue plans.
- The company is raising its full year 2023 guidance for revenue, adjusted EBITDA, and adjusted earnings per share.
- Revenue guidance is driven by increased expectations for U.S. Pet Health, poultry, and aqua, partially offset by lowered expectations for U.S. Farm Animal and contract manufacturing revenue.
- Interest rates and foreign exchange rates consistent with those as of the beginning of August are reflected in the financial guidance.
- Financial results impacted by estimated $90-$110 million of revenue related to customer purchasing shifted from the second quarter into the first as a result of ERP system commercial ordering blackout period for legacy Bayer Animal Health products in April.
- Net loss for the second quarter of 2023 was $97 million, a significant increase compared to the same period in 2022.
- Adjusted EPS for the second quarter of 2023 was $0.18, a 54% decrease compared with the same period in 2022.
- Adjusted EBITDA was $222 million in the second quarter of 2023, a 27% decrease compared to the second quarter of 2022.
- Cash provided by operations was $61 million in the second quarter of 2023 compared to cash provided by operations of $312 million in the second quarter of 2022.
-
Second Quarter 2023 Financial Results
-
Revenue of
, impacted by an estimated$1,057 million of revenue related to customer purchasing shifted from the second quarter into the first as a result of ERP system commercial ordering blackout period for legacy Bayer Animal Health products in April$90 -$110 million -
Reported Net Loss of
, Adjusted Net Income of$(97) million $90 million -
Adjusted EBITDA of
or$222 million 21.0% of Revenue -
Reported EPS of
, Adjusted EPS of$(0.20) $0.18 - Net leverage ratio of 5.9x Adjusted EBITDA
-
Revenue of
-
Raising full year 2023 guidance ranges to reflect current assumptions:
-
Revenue of
to$4,350 $4,410 million -
Reported Net Loss of
to$127 , Reported diluted EPS of$170 million to$(0.34) $(0.26) -
Adjusted EPS of
to$0.80 , Adjusted EBITDA of$0.89 to$950 $1,010 million - Net leverage ratio expected at 5.5x to 5.8x Adjusted EBITDA at year-end 2023
-
Revenue of
- Announced the Environmental Protection Agency (EPA) completed its review of Seresto®, confirming continued registration
“Elanco exceeded expectations for the second quarter and first half of 2023, putting us on track to return to revenue growth in the second half and raise full year guidance for revenue, adjusted EBITDA and adjusted EPS. Excluding the estimated impact of the successful ERP integration in the second quarter, we delivered sequential improvement in topline performance driven by strong performance in our
“We also made significant progress on our late-stage pipeline – advancing strategic programs and enhancing our confidence in our differentiation and launch revenue plans. By the end of August, we expect the FDA will have all data necessary to approve our differentiated JAK inhibitor for canine dermatology, our differentiated broad spectrum parasiticide for dogs, and Bovaer, a novel product for methane reduction in cattle, supporting our timeline for a path to approval in the first half of 2024 for these potential blockbusters. We are very encouraged by this progress and are intently focused on our launch preparation strategies.”
Financial Highlights
Second Quarter Results (dollars in millions, except per share amounts) |
2023 |
|
2022 |
|
Change (%) |
CC Change(1) (%) |
||
|
|
|
|
|
||||
Pet Health |
|
|
|
|
(15 |
)% |
(14 |
)% |
Farm Animal |
|
|
|
|
(5 |
)% |
(3 |
)% |
Cattle |
|
|
|
|
(15 |
)% |
(13 |
)% |
Poultry |
|
|
|
|
2 |
% |
5 |
% |
Swine |
|
|
|
|
0 |
% |
1 |
% |
Aqua |
|
|
|
|
19 |
% |
17 |
% |
Contract Manufacturing |
|
|
|
|
0 |
% |
1 |
% |
Total Revenue |
|
|
|
|
(10 |
)% |
(9 |
)% |
Reported Net Loss |
|
) |
|
) |
870 |
% |
|
|
Adjusted EBITDA |
|
|
|
|
(27 |
)% |
|
|
Reported EPS |
|
) |
|
) |
(900 |
)% |
|
|
Adjusted EPS |
|
|
|
|
(54 |
)% |
|
(1) CC = Constant Currency, representing the growth rate excluding the impact of foreign exchange rates. |
Numbers may not add due to rounding. |
In the second quarter of 2023, revenue was
The following table summarizes the estimated impact from the ERP Blackout on Pet Health and Farm Animal revenue:
Second Quarter Results (dollars in millions) |
2023 |
CC Change(1) (%) |
Estimated ERP
|
Estimated ERP
|
|
|
|
|
|
|
|
Pet Health |
|
(14 |
)% |
(11)% to (13)% |
|
Farm Animal |
|
(3 |
)% |
(5)% |
|
Contract Manufacturing |
|
1 |
% |
|
|
Total Revenue |
|
(9 |
)% |
(8)% to (9)% |
|
(1) CC = Constant Currency, representing the growth rate excluding the impact of foreign exchange rates. |
Numbers may not add due to rounding. |
Pet Health revenue was
Farm Animal revenue was
Contract Manufacturing revenue was
Reported and adjusted gross profit was
Total operating expense was
Asset impairment, restructuring and other special charges were
Reported and adjusted net interest expense was
Other expense was
The reported effective tax rate decreased to (23.0)% in the second quarter of 2023 compared to
Net loss for the second quarter of 2023 was
Adjusted EBITDA was
The following table summarizes the estimated impact from the ERP Blackout on adjusted EBITDA and adjusted EPS:
Second Quarter Results (dollars in millions, except per share amounts) |
2023 |
Change (%) |
Estimated ERP
|
|
|
|
|
|
|
Adjusted EBITDA |
|
(27 |
)% |
|
Adjusted EPS |
|
(54 |
)% |
|
Working Capital and Balance Sheet
Cash provided by operations was
As of June 30, 2023, Elanco’s net leverage ratio was 5.9x adjusted EBITDA, compared to 5.4x as of March 31, 2023.
First Half Results (dollars in millions, except per share amounts) |
2023 |
2022 |
Change (%) |
CC Change(1) (%) |
||
|
|
|
|
|
||
Pet Health |
|
|
(5 |
)% |
(3 |
)% |
Farm Animal |
|
|
(2 |
)% |
1 |
% |
Cattle |
|
|
(7 |
)% |
(5 |
)% |
Poultry |
|
|
2 |
% |
6 |
% |
Swine |
|
|
1 |
% |
5 |
% |
Aqua |
|
|
6 |
% |
6 |
% |
Contract Manufacturing |
|
|
(28 |
)% |
(23 |
)% |
Total Revenue |
|
|
(4 |
)% |
(1 |
)% |
Reported Net Income |
|
|
(85 |
)% |
|
|
Adjusted EBITDA |
|
|
(6 |
)% |
|
|
Reported EPS |
|
|
(88 |
)% |
|
|
Adjusted EPS |
|
|
(16 |
)% |
|
(1) CC = Constant Currency, representing the growth rate excluding the impact of foreign exchange rates. |
Numbers may not add due to rounding. |
In the first half of 2023, revenue was
Pet Health revenue was
The Advantage® Family of products contributed
Farm Animal revenue was
Select Business Highlights Since the Last Earnings Call
- Environmental Protection Agency (EPA) completed its review of Seresto® and confirmed the continued registration of the product.
-
Launched Canine Parvovirus Monoclonal Antibody treatment in
U.S. after receiving allU.S. Department of Agriculture state approvals. -
Entered into
accounts receivable asset securitization facility, with the intent to retire the company’s August 2023 bonds on August 7, 2023.$300 million - Released 2022 Environmental, Social and Governance Report, demonstrating sustainability progress in internal operations and customer collaborations.
Financial Guidance
Elanco is updating financial guidance for the full year 2023, summarized in the following table:
2023 Full Year (dollars in millions, except per share amounts) |
May
|
|
August
|
||||
|
|
|
|
|
|
|
|
Revenue |
|
to |
|
|
|
to |
|
Reported Net Income (Loss) |
|
to |
|
|
|
to |
|
Adjusted EBITDA |
|
to |
|
|
|
to |
|
Reported EPS |
|
to |
|
|
|
to |
|
Adjusted EPS |
|
to |
|
|
|
to |
|
Elanco is raising its full year 2023 guidance for revenue, adjusted EBITDA and adjusted earnings per share. The raised revenue guidance is driven by increased expectations for
Additionally, the company is providing guidance for the third quarter of 2023, as summarized in the following table:
2023 Third Quarter (dollars in millions, except per share amounts) |
|
Guidance |
||
|
|
|
|
|
Revenue |
|
|
to |
|
Reported Net Income (Loss) |
|
|
to |
|
Adjusted EBITDA |
|
|
to |
|
Reported EPS |
|
|
to |
|
Adjusted EPS |
|
|
to |
|
Revenue guidance for the third quarter represents an estimated
The financial guidance reflects interest rates and foreign exchange rates consistent with those as of the beginning of August.
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 second quarter financial and operational results, discuss third quarter and full year 2023 financial guidance, 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.
ABOUT ELANCO
Elanco Animal Health Incorporated (NYSE: ELAN) is a global leader in animal health dedicated to innovating and delivering products and services to prevent and treat disease in farm animals and pets, creating value for farmers, pet owners, veterinarians, stakeholders and society as a whole. With nearly 70 years of animal health heritage, we are committed to helping our customers improve the health of animals in their care, while also making a meaningful impact on our local and global communities. At Elanco, we are driven by our vision of Food and Companionship Enriching Life and our Elanco Healthy Purpose™ – all to advance the health of animals, people, the planet and our enterprise. Learn more at www.elanco.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements concerning product launches and revenue from such products, our 2023 full year and third quarter guidance and long-term expectations, our expectations regarding debt levels, and expectations regarding our industry and our operations, performance and financial condition, and including, in particular, statements relating to our business, growth strategies, distribution strategies, product development efforts and future expenses.
Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important risk factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions, including but not limited to the following:
- heightened competition, including from generics;
- the impact of disruptive innovations and advances in veterinary medical practices, animal health technologies and alternatives to animal-derived protein;
- changes in regulatory restrictions on the use of antibiotics in farm animals;
- our ability to implement our business strategies or achieve targeted cost efficiencies and gross margin improvements;
- consolidation of our customers and distributors;
- an outbreak of infectious disease carried by farm animals;
- demand, supply and operational challenges associated with the effects of a human disease outbreak, epidemic, pandemic or other widespread public health concern;
-
the potential impact on our business and global economic conditions resulting from the conflict involving
Russia andUkraine ; - the success of our research and development (R&D) and licensing efforts;
- misuse, off-label or counterfeiting use of our products;
- unanticipated safety, quality or efficacy concerns and the impact of identified concerns associated with our products;
- fluctuations in our business results due to seasonality and other factors;
- the impact of weather conditions, including those related to climate change, and the availability of natural resources;
- risks related to the modification of foreign trade policy;
- risks related to currency exchange rate fluctuations;
- our dependence on the success of our top products;
- the impact of customer exposure to rising costs and reduced customer income;
- the lack of availability or significant increases in the cost of raw materials;
- the impact of increased or decreased sales into our distribution channels resulting in fluctuations in our revenues;
- risks related to the write-down of goodwill or identifiable intangible assets;
- risks related to the evaluation of animals;
- manufacturing problems and capacity imbalances;
- the impact of litigation, regulatory investigations and other legal matters, including the risk to our reputation and the risk that our insurance policies may be insufficient to protect us from the impact of such matters;
- actions by regulatory bodies, including as a result of their interpretation of studies on product safety;
- risks related to tax expense or exposure;
- risks related to environmental, health and safety laws and regulations;
- risks related to our presence in foreign markets;
- challenges to our intellectual property rights or our alleged violation of rights of others;
- our dependence on sophisticated information technology and infrastructure and the impact of breaches of our information technology systems;
- the impact of increased regulation or decreased financial support related to farm animals;
- adverse effects of labor disputes, strikes, work stoppages and the loss of key personnel or highly skilled employees;
- risks related to underfunded pension plan liabilities;
- our ability to complete acquisitions and successfully integrate the businesses we acquire, including Kindred Biosciences, Inc. (KindredBio) and the animal health business of Bayer Aktiengesellschaft (Bayer Animal Health);
- the effect of our substantial indebtedness on our business, including restrictions in our debt agreements that limit our operating flexibility, and changes in our credit ratings that lead to higher borrowing expenses;
- risks related to certain governance provisions in our constituent documents; and
- any failure to maintain an effective system of disclosure controls and internal control over financial reporting, including arising from an identified material weakness.
For additional information about the factors that could cause actual results to differ materially from forward-looking statements, please see the company’s latest Form 10-K and Form 10-Qs filed with the Securities and Exchange Commission. Although we have attempted to identify important risk factors, there may be other risk factors not presently known to us or that we presently believe are not material that could cause actual results and developments to differ materially from those made in or suggested by the forward-looking statements contained in this press release. If any of these risks materialize, or if any of the above assumptions underlying forward-looking statements prove incorrect, actual results and developments may differ materially from those made in or suggested by the forward-looking statements contained in this press release. We caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this press release. Any forward-looking statement made by us in this press release speaks only as of the date thereof. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or to revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should be viewed as historical data.
Use of Non-GAAP Financial Measures:
We use non-GAAP financial measures, such as revenue excluding the impact of foreign exchange rate effects, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss), adjusted EPS, adjusted gross profit, adjusted gross margin and net debt leverage to assess and analyze our operational results and trends as explained in more detail in the reconciliation tables later in this release.
We believe these non-GAAP financial measures are useful to investors because they provide greater transparency regarding our operating performance. Reconciliation of non-GAAP financial measures and reported GAAP financial measures are included in the tables accompanying this press release and are posted on our website at www.elanco.com. The primary material limitations associated with the use of such non-GAAP measures as compared to
Availability of Certain Information
We use our website to disclose important company information to investors, customers, employees and others interested in Elanco. We encourage investors to consult our website regularly for important information about Elanco, including an Investor Overview presentation containing a general overview of the business which can be found in the Events and Presentations page of the website.
Elanco Animal Health Incorporated Unaudited Condensed Consolidated Statements of Operations (Dollars and shares in millions, except per share data) |
|||||||||||||||
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Revenue |
$ |
1,057 |
|
|
$ |
1,175 |
|
|
$ |
2,314 |
|
$ |
2,401 |
||
Costs, expenses, and other: |
|
|
|
|
|
|
|
||||||||
Cost of sales |
|
434 |
|
|
|
484 |
|
|
|
928 |
|
|
993 |
||
Research and development |
|
81 |
|
|
|
82 |
|
|
|
162 |
|
|
163 |
||
Marketing, selling, and administrative |
|
353 |
|
|
|
343 |
|
|
|
680 |
|
|
666 |
||
Amortization of intangible assets |
|
136 |
|
|
|
133 |
|
|
|
270 |
|
|
270 |
||
Asset impairment, restructuring, and other special charges |
|
35 |
|
|
|
86 |
|
|
|
75 |
|
|
126 |
||
Interest expense, net of capitalized interest |
|
74 |
|
|
|
67 |
|
|
|
138 |
|
|
119 |
||
Other expense (income), net |
|
23 |
|
|
|
(6 |
) |
|
|
32 |
|
|
3 |
||
(Loss) income before income taxes |
$ |
(79 |
) |
|
$ |
(14 |
) |
|
$ |
29 |
|
$ |
61 |
||
Income tax expense (benefit) |
|
18 |
|
|
|
(4 |
) |
|
|
23 |
|
|
20 |
||
Net (loss) income |
$ |
(97 |
) |
|
$ |
(10 |
) |
|
$ |
6 |
|
$ |
41 |
||
(Loss) earnings per share: |
|
|
|
|
|
|
|
||||||||
Basic |
$ |
(0.20 |
) |
|
$ |
(0.02 |
) |
|
$ |
0.01 |
|
$ |
0.08 |
||
Diluted |
$ |
(0.20 |
) |
|
$ |
(0.02 |
) |
|
$ |
0.01 |
|
$ |
0.08 |
||
Weighted average shares outstanding: |
|
|
|
|
|
|
|
||||||||
Basic |
|
492.6 |
|
|
|
488.4 |
|
|
|
491.8 |
|
|
488.2 |
||
Diluted |
|
492.6 |
|
|
|
488.4 |
|
|
|
492.7 |
|
|
492.1 |
Elanco Animal Health Incorporated
Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information
(Unaudited)
(Dollars and shares in millions, except per share data)
We define adjusted gross profit as total revenue less adjusted cost of sales and adjusted gross margin as adjusted gross profit divided by total revenue.
We define adjusted net income as net income (loss) excluding amortization of intangible assets, purchase accounting adjustments to inventory, integration costs of acquisitions, severance, asset impairment, gain on sale of assets, facility exit costs, tax valuation allowances and other specified significant items, such as unusual or non-recurring items that are unrelated to our long-term operations adjusted for income tax expense associated with the excluded financial items.
We define adjusted EBITDA as net income (loss) adjusted for interest expense (income), which includes debt extinguishment losses, income tax expense (benefit), and depreciation and amortization, further adjusted to exclude purchase accounting adjustments to inventory, integration costs of acquisitions, severance, asset impairment, gain on sale of assets, facility exit costs and other specified significant items, such as unusual or non-recurring items that are unrelated to our long-term operations.
We define adjusted EPS as adjusted net income divided by the number of weighted average shares outstanding for the periods ended June 30, 2023 and 2022.
We define net debt as gross debt less cash and cash equivalents on the balance sheet. We define gross debt as the sum of the current portion of long-term debt and long-term debt excluding unamortized debt issuance costs. We define the net leverage ratio as gross debt less cash and cash equivalents divided by adjusted EBITDA. This calculation does not include Term Loan B covenant-related adjustments that reduce this leverage ratio.
The following is a reconciliation of GAAP Reported for the three months ended June 30, 2023 and 2022 to Selected Non-GAAP Adjusted information:
|
Three Months Ended June 30, 2023 |
|
Three Months Ended June 30, 2022 |
|||||||||||||||||||
|
GAAP
|
|
Adjusted
|
|
Non-
|
|
GAAP
|
|
Adjusted
|
|
Non-
|
|||||||||||
Amortization of intangible assets |
$ |
136 |
|
|
$ |
136 |
|
|
$ |
— |
|
$ |
133 |
|
|
$ |
133 |
|
|
$ |
— |
|
Asset impairment, restructuring and other special charges (1) |
|
35 |
|
|
|
35 |
|
|
|
— |
|
|
86 |
|
|
|
86 |
|
|
|
— |
|
Interest expense, net of capitalized interest (2) |
|
74 |
|
|
|
— |
|
|
|
74 |
|
|
67 |
|
|
|
17 |
|
|
|
50 |
|
Other expense (income), net (3) |
|
23 |
|
|
|
21 |
|
|
|
2 |
|
|
(6 |
) |
|
|
(2 |
) |
|
|
(4 |
) |
(Loss) income before taxes |
|
(79 |
) |
|
|
192 |
|
|
|
113 |
|
|
(14 |
) |
|
|
234 |
|
|
|
220 |
|
Income tax expense (benefit) (4) |
|
18 |
|
|
|
(5 |
) |
|
|
23 |
|
|
(4 |
) |
|
|
(33 |
) |
|
|
29 |
|
Net (loss) income |
$ |
(97 |
) |
|
$ |
187 |
|
|
$ |
90 |
|
$ |
(10 |
) |
|
$ |
201 |
|
|
$ |
191 |
|
(Loss) earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
basic |
$ |
(0.20 |
) |
|
$ |
0.38 |
|
|
$ |
0.18 |
|
$ |
(0.02 |
) |
|
$ |
0.41 |
|
|
$ |
0.39 |
|
diluted |
$ |
(0.20 |
) |
|
$ |
0.38 |
|
|
$ |
0.18 |
|
$ |
(0.02 |
) |
|
$ |
0.41 |
|
|
$ |
0.39 |
|
Adjusted weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
basic |
|
492.6 |
|
|
|
492.6 |
|
|
|
492.6 |
|
|
488.4 |
|
|
|
488.4 |
|
|
|
488.4 |
|
diluted (5) |
|
492.6 |
|
|
|
492.6 |
|
|
|
492.6 |
|
|
488.4 |
|
|
|
492.0 |
|
|
|
492.0 |
|
Numbers may not add due to rounding. |
||
The table above reflects only line items with non-GAAP adjustments. |
||
(a) |
The company uses non-GAAP financial measures that differ from financial statements reported in conformity with |
|
(b) |
Adjustments to certain GAAP reported measures for the three months ended June 30, 2023 and 2022 include the following: | |
|
(1) |
Adjustments of |
|
(2) |
Adjustments of |
|
(3) |
Adjustments of |
|
(4) |
Adjustments of |
|
(5) |
During the three months ended June 30, 2022, we reported a GAAP net loss and thus potential dilutive common shares were not assumed to have been issued since their effect is anti-dilutive. During the same period, we reported non-GAAP net income. As a result, potential dilutive common shares would not have an anti-dilutive effect, and diluted weighted average shares outstanding for purposes of calculating adjusted EPS include 3.6 million of common stock equivalents. |
|
Three Months Ended June 30, |
||||||
|
2023 |
|
2022 |
||||
As reported diluted EPS |
$ |
(0.20 |
) |
|
$ |
(0.02 |
) |
Amortization of intangible assets |
|
0.28 |
|
|
|
0.27 |
|
Asset impairment, restructuring and other special charges |
|
0.07 |
|
|
|
0.17 |
|
Interest expense, net of capitalized interest |
|
— |
|
|
|
0.03 |
|
Other (income) expense, net |
|
0.04 |
|
|
|
— |
|
Subtotal |
|
0.39 |
|
|
|
0.47 |
|
Tax impact of adjustments (1) |
|
(0.01 |
) |
|
|
(0.06 |
) |
Total adjustments to diluted EPS |
$ |
0.38 |
|
|
$ |
0.41 |
|
|
|
|
|
||||
Adjusted diluted EPS (2) |
$ |
0.18 |
|
|
$ |
0.39 |
|
Numbers may not add due to rounding. |
|
(1) |
2023 includes the favorable adjustment relating to the increase in the valuation allowance recorded against our deferred tax assets (impact of |
(2) |
Adjusted diluted EPS is calculated as the sum of as reported diluted EPS and total adjustments to diluted EPS. |
The following is a reconciliation of GAAP Reported for the six months ended June 30, 2023 and 2022 to Selected Non-GAAP Adjusted information:
|
Six Months Ended June 30, 2023 |
|
Six Months Ended June 30, 2022 |
||||||||||||||||
|
GAAP
|
|
Adjusted
|
|
Non-
|
|
GAAP
|
|
Adjusted
|
|
Non-
|
||||||||
Cost of sales (1) |
$ |
928 |
|
$ |
1 |
|
|
$ |
927 |
|
$ |
993 |
|
$ |
— |
|
|
$ |
993 |
Amortization of intangible assets |
|
270 |
|
|
270 |
|
|
|
— |
|
|
270 |
|
|
270 |
|
|
|
— |
Asset impairment, restructuring and other special charges (2) |
|
75 |
|
|
75 |
|
|
|
— |
|
|
126 |
|
|
126 |
|
|
|
— |
Interest expense, net of capitalized interest (3) |
|
138 |
|
|
— |
|
|
|
138 |
|
|
119 |
|
|
17 |
|
|
|
102 |
Other expense, net (4) |
|
32 |
|
|
19 |
|
|
|
13 |
|
|
3 |
|
|
(1 |
) |
|
|
4 |
Income before taxes |
|
29 |
|
|
365 |
|
|
|
394 |
|
|
61 |
|
|
412 |
|
|
|
473 |
Income tax expense (5) |
|
23 |
|
|
(61 |
) |
|
|
84 |
|
|
20 |
|
|
(84 |
) |
|
|
104 |
Net income |
$ |
6 |
|
$ |
304 |
|
|
$ |
310 |
|
$ |
41 |
|
$ |
328 |
|
|
$ |
369 |
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
||||||||
basic |
$ |
0.01 |
|
$ |
0.62 |
|
|
$ |
0.63 |
|
$ |
0.08 |
|
$ |
0.67 |
|
|
$ |
0.75 |
diluted |
$ |
0.01 |
|
$ |
0.62 |
|
|
$ |
0.63 |
|
$ |
0.08 |
|
$ |
0.67 |
|
|
$ |
0.75 |
Adjusted weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
||||||||
basic |
|
491.8 |
|
|
491.8 |
|
|
|
491.8 |
|
|
488.2 |
|
|
488.2 |
|
|
|
488.2 |
diluted |
|
492.7 |
|
|
492.7 |
|
|
|
492.7 |
|
|
492.1 |
|
|
492.1 |
|
|
|
492.1 |
Numbers may not add due to rounding. |
||
The table above reflects only line items with non-GAAP adjustments. |
||
(a) |
The company uses non-GAAP financial measures that differ from financial statements reported in conformity with |
|
(b) |
Adjustments to certain GAAP reported measures for the six months ended June 30, 2023 and 2022 include the following: | |
|
(1) |
Adjustments of |
|
(2) |
Adjustments of |
|
(3) |
Adjustments of |
|
(4) |
Adjustments of |
|
(5) |
Adjustments of |
|
Six Months Ended June 30, |
||||||
|
2023 |
|
2022 |
||||
As reported diluted EPS |
$ |
0.01 |
|
|
$ |
0.08 |
|
Amortization of intangible assets |
|
0.55 |
|
|
|
0.55 |
|
Asset impairment, restructuring and other special charges |
|
0.15 |
|
|
|
0.26 |
|
Interest expense, net of capitalized interest |
|
— |
|
|
|
0.03 |
|
Other (income) expense, net |
|
0.04 |
|
|
|
0.00 |
|
Subtotal |
|
0.74 |
|
|
|
0.84 |
|
Tax impact of adjustments (1) |
|
(0.12 |
) |
|
|
(0.17 |
) |
Total Adjustments to EPS |
$ |
0.62 |
|
|
$ |
0.67 |
|
|
|
|
|
||||
Adjusted diluted EPS (2) |
$ |
0.63 |
|
|
$ |
0.75 |
|
Numbers may not add due to rounding. |
|
(1) |
2023 includes the favorable adjustment relating to the increase in the valuation allowance recorded against our deferred tax assets (impact of |
(2) |
Adjusted diluted EPS is calculated as the sum of as reported diluted EPS and total adjustments to diluted EPS. |
For the periods presented, we have not made adjustments for all items that may be considered unrelated to our long-term operations. We believe adjusted EBITDA, when used in conjunction with our results presented in accordance with
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||
|
2023 |
|
2022 |
2023 |
|
2022 |
||||||||
Reported net (loss) income |
$ |
(97 |
) |
|
$ |
(10 |
) |
$ |
6 |
|
|
$ |
41 |
|
Net interest expense |
|
74 |
|
|
|
67 |
|
|
138 |
|
|
|
119 |
|
Income tax (benefit) expense |
|
18 |
|
|
|
(4 |
) |
|
23 |
|
|
|
20 |
|
Depreciation and amortization |
|
177 |
|
|
|
171 |
|
|
350 |
|
|
|
347 |
|
EBITDA |
$ |
171 |
|
|
$ |
224 |
|
$ |
516 |
|
|
$ |
527 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
||||||||
Cost of sales |
$ |
— |
|
|
$ |
— |
|
$ |
1 |
|
|
$ |
— |
|
Asset impairment, restructuring and other special charges |
|
35 |
|
|
|
86 |
|
|
75 |
|
|
|
126 |
|
Other expense (income), net |
|
21 |
|
|
|
(2 |
) |
|
19 |
|
|
|
(1 |
) |
Accelerated depreciation and amortization (1) |
|
(5 |
) |
|
|
(5 |
) |
|
(10 |
) |
|
|
(10 |
) |
Adjusted EBITDA |
$ |
222 |
|
|
$ |
304 |
|
$ |
601 |
|
|
$ |
642 |
|
Adjusted EBITDA margin |
|
21.0 |
% |
|
|
25.9 |
% |
|
26.0 |
% |
|
|
26.7 |
% |
Numbers may not add due to rounding. |
|
(1) |
Represents depreciation and amortization of certain assets that was accelerated during the three and six months ended June 30, 2023 and 2022. This amount must be added back to arrive at adjusted EBITDA because it is included in asset impairment, restructuring and other special charges but it has already been excluded from EBITDA in the "Depreciation and amortization" row above. |
The following is a reconciliation of gross debt to net debt as of June 30, 2023:
|
|
|
|
Long-term debt |
|
6,023 |
|
Current portion of long-term debt |
|
39 |
|
Less: Unamortized debt issuance costs |
|
(56 |
) |
Total gross debt |
|
6,118 |
|
Less: Cash and cash equivalents |
|
367 |
|
Net Debt |
|
5,751 |
|
Elanco Animal Health Incorporated
Guidance
Reconciliation of 2023 full year reported EPS guidance to 2023 adjusted EPS guidance is as follows:
|
Full Year 2023 Guidance |
||
Reported loss per share |
|
to |
|
Amortization of intangible assets |
Approx. |
||
Asset impairment, restructuring, and other special charges(1) |
|
to |
|
Other expense, net |
Approx. |
||
Subtotal |
|
to |
|
Tax impact of adjustments |
|
to |
|
Total adjustments to EPS |
|
to |
|
Adjusted earnings per share(2) |
|
to |
|
Numbers may not add due to rounding. |
|
(1) |
Asset impairment, restructuring, and other special charges adjustments are related to integration efforts, including the acquisition of the animal health business of Bayer. |
(2) |
Adjusted EPS is calculated as the sum of reported EPS and total adjustments to EPS. |
Reconciliation of 2023 full year reported net loss to adjusted EBITDA guidance is as follows:
$ millions |
Full Year 2023 Guidance |
||
Reported net loss |
|
to |
|
Net interest expense |
Approx. |
||
Income tax benefit |
|
to |
|
Depreciation and amortization |
Approx. |
||
EBITDA |
|
to |
|
Non-GAAP adjustments |
|
|
|
Cost of Sales |
Approx. |
||
Asset impairment, restructuring, and other special charges |
Approx. |
||
Accelerated depreciation and amortization |
Approx. |
||
Other income, net |
Approx. |
||
Adjusted EBITDA |
|
to |
|
Adjusted EBITDA margin |
|
to |
|
Reconciliation of 2023 third quarter reported EPS guidance to 2023 third quarter adjusted EPS guidance is as follows:
|
Third Quarter 2023 Guidance |
||
Reported loss per share |
|
to |
|
Amortization of intangible assets |
Approx. |
||
Asset impairment, restructuring, and other special charges (1) |
|
to |
|
Subtotal |
|
to |
|
Tax impact of adjustments |
|
to |
|
Total adjustments to EPS |
Approx |
||
Adjusted earnings per share (2) |
|
to |
|
Numbers may not add due to rounding. |
|
(1) |
Asset impairment, restructuring, and other special charges adjustments are related to integration efforts, including the acquisition of the animal health business of Bayer. |
(2) |
Adjusted EPS is calculated as the sum of reported EPS and total adjustments to EPS. |
Reconciliation of 2023 third quarter reported net loss to 2023 third quarter adjusted EBITDA guidance is as follows:
$ millions |
Third Quarter 2023 Guidance |
||
Reported net loss |
|
to |
|
Net interest expense |
Approx. |
||
Income tax provision |
|
to |
|
Depreciation and amortization |
Approx. |
||
EBITDA |
|
to |
|
Non-GAAP adjustments |
|
|
|
Asset impairment, restructuring, and other special charges |
Approx. |
||
Other expense, net |
Approx. |
||
Adjusted EBITDA |
|
to |
|
Adjusted EBITDA margin |
|
to |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20230807477096/en/
Investor Contact: Kathryn Grissom (317) 273-9284 or kathryn.grissom@elancoah.com
Media Contact: Colleen Parr Dekker (317) 989-7011 or colleen.dekker@elancoah.com
Source: Elanco Animal Health Incorporated
FAQ
What were Elanco Animal Health's reported revenue and net loss for the second quarter of 2023?
What impact did the ERP system commercial ordering blackout period have on Elanco Animal Health's financial results?
What is Elanco Animal Health's updated full year 2023 revenue guidance?
What progress has Elanco Animal Health made on its late-stage pipeline?