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• Revenue: $1.03 billion, representing a 4% reported decline.

• Organic Constant Currency Revenue Growth: 1% excluding divestitures and foreign exchange impacts.

• Debt Paydown: $1.3 billion in the third quarter.

• Net Leverage Ratio: 4.3 times at the end of the third quarter.

• Adjusted EBITDA: $163 million, a decrease of $51 million on a reported basis.

• Adjusted EPS: $0.13, a decrease of $0.05 in the quarter.

• Cash Provided by Operations: $162 million in the quarter.

• Gross Margin: 52.2%, a decline of 230 basis points.

• Price Growth: 2% year-to-date.

• Innovation Sales: $112 million in the third quarter, $321 million year-to-date.

• Farm Animal Revenue Growth: 3% globally, 11% in the US.

• Pet Health Revenue Decline: 2% in the third quarter.

• Interest Expense: $46 million, a decrease of $26 million year-over-year.

• 2025 Revenue Expectations: $600 million to $700 million from new products.

• Warning! GuruFocus has detected 2 Warning Sign with ELAN.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Elanco Animal Health Inc (NYSE:ELAN) achieved key milestones in its innovation portfolio, with new products driving growth and improved cash flow.

• The company received US FDA approval for Centralia and Credelio Quattro, expected to be significant competitors in the pet health market.

• Elanco paid down $1.3 billion of debt in the third quarter, reducing net leverage significantly.

• The company expects organic revenue growth to accelerate to mid-single digits in 2025, driven by new product launches.

• Elanco's farm animal business showed strong performance, with Experior expected to reach blockbuster status with sales exceeding $100 million globally this year.

Negative Points

• U.S. Pet Health revenue declined 4% in the quarter due to competitive pressure and vaccine supply volatility.

• The international farm animal segment experienced a 3% organic constant currency revenue decline due to commercial model changes and a product recall.

• Gross margin declined by 230 basis points to 52.2% of revenue, impacted by product mix, inflation, and unfavorable manufacturing performance.

• The company faces an adjusted EBITDA headwind due to the insolvency of a key UK contract manufacturing organization.

• Elanco's total pet health revenue declined 2% in the third quarter, with competitive pressure in the veterinary clinic contributing to the decline.

Q & A Highlights

Q: Can you provide more details on the early progress and key metrics for the launch of Zen rally? A: Jeffrey Simmons, CEO, explained that the launch is progressing well, with key metrics such as in-clinic penetration and reorder rates being closely monitored. Several hundred new clinics are adopting Zen rally each week, and reorder rates have increased consistently over the first six weeks. The focus is on efficacy, and the product is performing exceptionally well in cases where other treatments have failed. More detailed metrics will be shared in future earnings calls.