Elanco Animal Health Reports Third Quarter 2025 Results

Raising Full Year Outlook and Innovation Target, Improving Year-End Net Leverage Ratio TargetThird Quarter 2025 Financial Results:Revenue of $1,137 million, an increase of 10% year-over-year; 9% organic constant currency growthReported Net Loss of $34 million, Adjusted Net Income of $94 millionAdjusted EBITDA of $198 million; Adjusted EBITDA Margin of 17.5% Reported EPS of $(0.07), Adjusted EPS of $0.19Net leverage ratio of 3.7x Adjusted EBITDAFull Year 2025 Guidance:Raising revenue guidance to $4,645 million to $4,670 million; expect accelerating organic constant currency revenue growth of 6% to 6.5% vs. 3% in 2024Raising 2025 innovation revenue target by $100 million at the midpoint of the range to $840 to $880 millionReported Net Loss of $56 million to $41 million, raising guidance for Adjusted EBITDA to $880 million to $900 millionReported Loss Per Share of $0.11 to $0.08, raising guidance for Adjusted EPS to $0.91 to $0.94 2025 year-end net leverage ratio target improved to 3.7x to 3.8x, enabled by year-to-date execution and disciplined working capital managementINDIANAPOLIS, Nov. 5, 2025 /PRNewswire/ -- Elanco Animal Health Incorporated (NYSE: ELAN) today reported financial results for the third quarter of 2025, provided guidance for the fourth quarter of 2025, and updated guidance for the full year 2025."Thank you to our global team and customers as Elanco delivered strong results ahead of expectations, with an unrelenting focus on growth, innovation, and cash," said Jeff Simmons, President and CEO of Elanco. "Organic constant currency revenue growth of 9% reflects the outperformance of our diverse portfolio of innovation on a stabilizing base business. We are raising our full year innovation revenue target with positive momentum for Credelio Quattro, Experior, AdTab, and Zenrelia. We are also improving our year-end net leverage ratio target, having already achieved 3.7x. Our commitment to our IPP strategy is translating into consistent execution and confidence in our raised full-year outlook amidst a dynamic backdrop. We look forward to hosting the investment community on December 9th, to define Elanco's new era of growth with significant opportunity for long-term shareholder value creation."Select Business Highlights Since the Last Earnings CallCredelio Quattro™ achieved continued dollar share gains of broad-spectrum sales out of U.S. vet clinics in Q3**; reached $100 million in net sales in fewer than eight months, making it Elanco's fastest pet health blockbuster in history and one of the industry's fastest ever; highest puppy index versus other broad-spectrum endectos***Zenrelia™ global sales nearly doubled versus Q2 2025; estimated market share ~5% based on Elanco analysis in countries where launched; U.S. label updated to remove vaccine-induced disease language, and additional data submitted to FDA addressing vaccination response; launched in the EU, Great Britain, and Australia with a label consistent with other international markets where the product has already been approvedExperior® Q3 sales up approximately 70% year over year; AdTab™ continued robust growth trajectory with Q3 sales up over 25% year over yearSuccessfully completed refinancing of $2.1 billion Term Loan B debt facility; refinancing activity improves Elanco's debt portfolio's maturity risk profile and reduces interest costOpened Elanco's new global headquarters in downtown Indianapolis: a vibrant destination designed to foster collaboration, enable innovation, attract top talent, and serve as the heart of the OneHealth Innovation District**Per Kynetec Q3 data***Kynetec Puppy Index, September YTDFinancial ResultsThird Quarter Results(dollars in millions, except per share amounts)20252024Change (%)Organic CCGrowth (1) (%)Pet Health$533$48610 %8 %Farm Animal$593$53012 %10 %Cattle$289$25314 %13 %Poultry$217$18815 %13 %Swine$87$88(1) %(3) %Aqua$—$1(100) %Contract Manufacturing and Other (2)$11$14(21) %Total Revenue$1,137$1,03010 %9 %Gross Profit$607$53813 %Reported Net (Loss) Income (3)$(34)$364NMAdjusted EBITDA$198$16321 %Reported EPS (3)$(0.07)$0.73NMAdjusted EPS$0.19$0.1346 %(1) Organic CC Growth = Represents revenue growth excluding the impacts from our prior year divestiture of the aqua business, which was divested July 9, 2024, royalty revenue that was sold to a third party and the impact of foreign exchange rates.(2) Primarily represents revenue from arrangements in which the company manufactures products on behalf of a third party and royalty revenue. In May 2025, we entered into an agreement to monetize certain lotilaner U.S. royalties, among other potential future cash flows, to a third party for proceeds of $295 million. While we are no longer entitled to these qualifying royalties, we are required under GAAP to continue recognizing them as revenue. For the three months ended September 30, 2025, royalty revenue associated with this arrangement, which is reflected within the Contract Manufacturing and Other line in the table above, totaled $6 million.(3) Reported net income and EPS for the third quarter 2024 included the gain on divestiture of our aqua business. This gain had a $470 million, net of tax impact on reported net income (approximately $0.94 per diluted share).NM - Not meaningfulIn the third quarter of 2025, revenue was $1,137 million, an increase of 10% on a reported basis, or 9% on an organic constant currency basis, compared to the third quarter of 2024.Pet Health revenue was $533 million, an increase of 10% on a reported basis, or 8% on an organic constant currency basis. The year over year volume increase of 9% in the third quarter was primarily driven by new products, including Credelio Quattro and Zenrelia. The Advantage® Family of products and Seresto® contributed revenue of $111 million and $60 million, respectively. The increase in pet health revenue included a 1% decrease from price, compared to the third quarter of 2024, in line with the company's expectation and reflecting fluctuations in customer and product mix. The price decrease was not impacted by Elanco's recently launched products including Zenrelia and Credelio Quattro.Farm Animal revenue was $593 million, an increase of 12% on a reported basis, or 10% on an organic constant currency basis. Third quarter volumes were up 9%, driven by increased volumes across cattle and poultry, led by Experior in U.S. cattle and strength in poultry sales globally. Sales of the company's international farm animal products were negatively impacted in the third quarter by the shift of approximately $10 to $20 million of revenue from the third quarter into the second quarter due to customers' accelerated purchases during the second quarter, primarily in China, in advance of expected future tariff increases. Farm animal organic constant currency revenue growth included a 1% increase from price, compared to the third quarter of 2024.Gross profit was $607 million and gross margin percentage was 53.4% in the third quarter of 2025, an increase of 120 basis points compared to the third quarter of 2024. On an adjusted basis, gross profit was $601 million and gross margin percentage was 53.1% in the third quarter of 2025, a 90 basis point increase compared to the third quarter of 2024. The increase in gross margin percentage on both a reported and adjusted basis was primarily driven by the favorable productivity benefits from increased sales volumes.Total operating expenses were $440 million for the third quarter of 2025, an increase of 7% compared to the third quarter of 2024. Marketing, selling and administrative expenses increased 9% to $351 million, driven by the company's previously announced strategic investments in the global launches of new products and increased selling costs corresponding to increased sales volumes. Research and development expenses increased 2% to $89 million driven primarily by foreign exchange rates.Asset impairment, restructuring and other special charges were $25 million in the third quarter of 2025, compared to $17 million in the third quarter of 2024. Charges recorded in the third quarter of 2025 primarily related to two early-stage capital projects that were indefinitely suspended. Charges recorded in the third quarter of 2024 primarily related to asset impairments tied to the financial difficulties of our former contract manufacturing supply partner, TriRx Speke, and exit costs related to the strategic change in operating models in certain countries.Reported net interest expense was $52 million in the third quarter of 2025, a decrease of $6 million compared to the third quarter of 2024. The decrease was driven by lower outstanding debt balances partially offset by $13 million of imputed interest on the company's liability related to the lotilaner U.S. royalty monetization. Adjusted net interest expense, which excludes this imputed interest, was $34 million in the third quarter of 2025, a decrease of $12 million compared to the third quarter of 2024.The reported effective tax rate was 30.9% in the third quarter of 2025, which differed from the statutory tax rate primarily due to the tax impact from the jurisdictional mix of projected income and losses in non-U.S. jurisdictions and the impacts of discrete tax expenses during the quarter, including the remeasurement of certain deferred tax positions due to a foreign tax rate change. The adjusted effective tax rate was 26.5% in the third quarter of 2025, compared to 18.7% in the third quarter of 2024.Net loss for the third quarter of 2025 was $34 million, or $(0.07) per diluted share on a reported basis, compared with net income of $364 million, or $0.73 per diluted share, for the same period in 2024. Reported net income in 2024 included the gain on divestiture of the company's aqua business, which had an approximate impact of $0.94 on diluted earnings per share. On an adjusted basis, net income for the third quarter of 2025 was $94 million, or $0.19 per diluted share, a 46% increase compared with the same period in 2024. The increase in adjusted net income was largely due to the year-over-year increase in adjusted gross profit and decreased adjusted interest expense, partially offset by selling and marketing expenses supporting the company's global launches.Adjusted EBITDA was $198 million in the third quarter of 2025, a 21% increase compared to the third quarter of 2024. Adjusted EBITDA margin was 17.5% compared with 15.8% for the third quarter of 2024. The increase in adjusted EBITDA was also largely due to the year-over-year increase in adjusted gross profit, partially offset by the increased selling and marketing expenses supporting the company's global launches.Working Capital and Balance SheetCash provided by operations was $219 million in the third quarter of 2025, compared to cash provided by operations of $162 million in the third quarter of 2024.As of September 30, 2025, Elanco's net leverage ratio was 3.7x adjusted EBITDA, a decrease of 0.6x compared to December 31, 2024, driven by debt paydown efforts and strong cash generation. The company now expects to end the year with a net leverage ratio of 3.7x to 3.8x.Financial GuidanceElanco is updating financial guidance for the full year 2025, summarized in the following table.2025 Full Year(dollars in millions, except per share amounts)AugustGuidanceNovemberGuidanceRevenue$4,570to$4,620$4,645to$4,670Reported Net Loss$(38)to$(14)$(56)to$(41)Adjusted EBITDA$850to$890$880to$900Reported Loss per Share$(0.08)to$(0.03)$(0.11)to$(0.08)Adjusted Earnings per Share$0.85to$0.91$0.91to$0.94"I am pleased to have joined Elanco during this period of strong momentum," said Bob VanHimbergen, Executive Vice President and CFO of Elanco Animal Health. "Through consistent execution, we are again raising our 2025 full-year guidance, while also making incremental data-driven investments to power our innovation launches in this new era of growth. Additionally, we refinanced our $2.1 billion Term Loan B facility, extending the maturities through 2032. We expect our balance sheet to be in a strong position as we exit 2025, and we are excited to share more details at our December Investor Day on how Elanco is driving value creation through Elanco Ascend, our company-wide productivity initiative, as well as cash generation."Elanco anticipates a tailwind to revenue of approximately $30 million from the favorable impact of foreign exchange rates compared with the August earnings call. Excluding the impact of foreign exchange rates, royalty revenue sold to a third party, and the aqua divestiture, the company now expects revenue growth of 6% to 6.5% versus 5% to 6% previously. The company continues to expect price to contribute approximately 2 percentage points to full year revenue growth.Elanco now expects adjusted gross margin of 54.9% to 55.2%, up 30 basis points at the midpoint of the range versus the prior range, and now expects operating expenses to increase approximately 8% year over year in constant currency, versus 7% previously, with incremental strategic investment in the global launches of the innovation portfolio. Full year adjusted EBITDA includes a current estimate for net tariff impact of $10 to $14 million.Additionally, the company is providing guidance for the fourth quarter of 2025, as summarized in the following table: 2025 Fourth Quarter(dollars in millions, except per share amounts)GuidanceRevenue$1,085to$1,110Reported Net Loss$(100)to$(86)Adjusted EBITDA$168to$188Reported Loss per Share$(0.20)to$(0.17)Adjusted Earnings per Share$0.09to$0.12In the fourth quarter, Elanco expects a tailwind to revenue of approximately $10 million from the favorable impact of foreign exchange rates compared to the prior year. Excluding the impacts of foreign exchange rates and royalty revenue sold to a third party, the company expects 4% to 6% organic constant currency revenue growth. The company expects operating expenses up approximately 10% year over year in constant currency with strategic investment in the global launches of the innovation portfolio and a shift in timing of some expenses.The 2025 full year and fourth quarter financial guidance reflects foreign exchange rates as of the end of October. 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 DETAILSElanco will host a webcast and conference call at 8:00 a.m. Eastern Time today, during which company executives will review third quarter financial and operational results, discuss fourth quarter and full year 2025 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/events-and-presentations/default.aspx#module-event-upcoming.ABOUT ELANCOElanco 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 70 years of animal health heritage, we are committed to breaking boundaries and going beyond to help 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 purpose – all to Go Beyond for Animals, Customers, Society and Our People. 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 2025 full year and fourth quarter guidance and long-term expectations, our e