Elanco reports strong results, raises 2021 outlook

Elanco reports strong results, raises 2021 outlook

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Company’s total second quarter revenue up 118%

Elanco Animal Health Inc. reported higher-than-expected results for the second quarter of 2021 and increased its full year revenue outlook.

“Elanco continues to deliver strong results, extending our track record of execution since acquiring Bayer Animal Health a year ago,” said Jeff Simmons, president and CEO at Elanco. “Outperformance on both sides of our business allows us to raise 2021 revenue guidance for the third time, with full-year growth exceeding our long-term growth algorithm. We head into the back half of the year with confidence in our ability to drive sustainable double-digit adjusted EBITDA and adjusted EPS growth. We see evidence that our transformation is creating durable, long-term value for our customers, our shareholders, and our global team.”

In the second quarter of 2021, total revenue was US$1,279 million, an increase of 118%, or an increase of 114% without the impact of foreign exchange rates, compared with the second quarter of 2020, driven by the inclusion of the Bayer Animal Health business. Legacy Elanco revenue in the second quarter was US$750 million, an increase of 28% year over year. Gross margin, as a percentage of revenue, was 56.9%, an improvement of 740 basis points as compared with the second quarter of 2020. Total operating expense was US$479 million, an increase of 116% compared with the second quarter of 2020, driven by the inclusion of the Bayer Animal Health business. Net loss for the second quarter of 2021 was US$210 million, or US$0.43 per diluted share, compared with net loss of US$53 million, or US$0.13 per diluted share, for the same period in 2020.

Farm Animal revenue increased 79% for the quarter, driven by the addition of Bayer Animal Health product revenue of US$157 million. Legacy Elanco revenue increased 30% in the quarter, driven by a favorable comparison to the prior year period which included lower levels of demand due to the impact of the pandemic on global protein markets, the unwind of anticipatory buying by direct customers in international export markets, actions taken across brands to reduce channel inventory levels, and increased demand in China; partly offset in the current period by lower levels of demand in certain markets due to the negative impact of the pandemic on poultry and aqua consumption, production and profitability.

Pet Health revenue increased 170% for the quarter, driven by the addition of Bayer Animal Health product revenue of US$348 million. Legacy Elanco revenue increased 32% in the quarter, driven by a favorable comparison to the prior year period which included actions taken across brands to reduce channel inventory levels as well as reduced demand for veterinary products as a result of the pandemic, primarily in U.S. vaccines and international markets; and, in the current period, higher underlying volume trends from newer generation parasiticide and pain products, and price growth led by U.S. vaccines.

Elanco is updating its full year 2021 guidance for revenue, EPS, and adjusted EBITDA, which was most recently addressed on June 16, 2021, with the KindredBio acquisition announcement. The company’s raised revenue guidance reflects a balanced approach, including strong momentum to exit the second quarter, seasonality in Elanco’s higher-margin parasiticide products, likely moderation in pandemic-driven Pet Health tailwinds in the vet clinic, ongoing competitive dynamics, and strength in Elanco’s broad-based, durable portfolio.