Elanco Animal Health — Third Quarter 2026 Earnings Summary

Financial Performance:

• Third quarter 2026 revenue was $1.265 billion, an 11% increase year-over-year, with 9% organic constant currency growth.
• Reported net income was $18 million ($0.04 EPS), compared to a net loss of $34 million ($0.07 EPS) in the prior year period.
• Adjusted net income was $136 million ($0.27 EPS), a 45% increase year-over-year from $94 million ($0.19 EPS).
• Adjusted EBITDA was $243 million, a 23% increase year-over-year from $198 million, with an adjusted EBITDA margin of 19.5% compared to 17.5% in the prior year.
• Gross profit was $720 million (56.9% margin), an increase of 350 basis points year-over-year; adjusted gross profit was $699 million (56.1% margin), an increase of 300 basis points.
• Net leverage ratio was 2.9x Adjusted EBITDA as of September 30, 2026, a decrease of 0.7x from December 31, 2025.
• Cash provided by operations was $216 million in the third quarter, compared to $219 million in the prior year.
• Total operating expenses were $492 million, a 12% increase year-over-year, driven by a 12% rise in marketing, selling, and administrative expenses to $393 million and an 11% rise in R&D expenses to $99 million.
• Asset impairment, restructuring, and other special charges were $3 million, down from $25 million in the prior year.

Guidance and Future Outlook:

• Full year 2026 revenue guidance was raised to $5.155 billion to $5.18 billion, representing approximately 8% organic constant currency growth.
• Full year 2026 Adjusted EBITDA guidance was raised to $1.05 billion to $1.065 billion, a 17% year-over-year increase at the midpoint.
• Full year 2026 Adjusted EPS guidance was raised to $1.17 to $1.20, a 26% year-over-year increase at the midpoint.
• Full year 2026 innovation revenue target was raised to $1.275 billion.
• Full year 2026 adjusted gross margin guidance was raised to 55.8% to 56.0%, an increase of 100 basis points versus 2025.
• Fourth quarter 2026 revenue guidance is $1.190 billion to $1.215 billion.
• Fourth quarter 2026 Adjusted EBITDA guidance is $185 million to $200 million.
• Fourth quarter 2026 Adjusted EPS guidance is $0.16 to $0.19.
• Early 2027 outlook expects mid-single digit organic constant currency revenue growth, high-single digit Adjusted EBITDA growth, and low-double digit Adjusted EPS growth.
• Year-end net leverage ratio target is approximately 2.9x Adjusted EBITDA.

Business Segments and Product Lines:

• Pet Health revenue was $608 million, a 14% increase year-over-year on both reported and organic constant currency bases.
• Farm Animal revenue was $631 million, a 6% reported increase (4% organic constant currency), driven by a 3% price increase and 2% contribution from AHV International.
• Cattle revenue was $339 million, a 17% reported increase (11% organic constant currency).
• Poultry revenue was $201 million, a 7% reported decrease (7% organic constant currency).
• Swine revenue was $91 million, a 5% reported increase (5% organic constant currency).
• Contract Manufacturing and Other revenue was $26 million, a 136% reported increase from $11 million.
• Zenrelia achieved its largest revenue quarter ever in the U.S. and International markets, with September as its largest month; U.S. JAK market share grew 7 points year-over-year.
• Credelio Quattro became Elanco's largest U.S. Pet Health branded product, surpassing Seresto, with U.S. share growing 9 points year-over-year.
• Credelio Quattro received a positive opinion from the European Medicines Agency for EU expansion, with a launch expected in Q1 2027.
• Befrena access is now open across clinics, with a full launch expected in Q1 2027.
• Global ruminants remained the fastest growing species, with revenue up 12% year-to-date on an organic constant currency basis.
• Price increased 4% in Q3, led by global Pet Health at 5%, while volume increased 5%.

Market and Competitive Landscape:

• Zenrelia gained 10 share points in Europe in H1 2026, five times the rate of the competitive entrant.
• Competitive activity had no fundamental impact on the trajectory of innovation products.
• Seresto was negatively impacted by U.S. retailer inventory draw down, though underlying performance remained in line with expectations.
• Approximately 20% of clinics purchasing Befrena had never used Zenrelia, indicating portfolio effect.

Risks and Challenges:

• Forward-looking statements are subject to risks including regional, national, or global political, economic, business, competitive, market, and regulatory conditions.
• Risks include the success of R&D, regulatory approval, and licensing efforts, as well as competition from generic products.
• Potential impacts from disruptive innovations, advances in veterinary practices, and alternatives to animal-derived protein.
• Risks related to antibiotic use restrictions, infectious disease outbreaks, and customer/distributor consolidation.
• Dependence on top products, ability to integrate acquisitions, and manufacturing capacity imbalances.
• Risks associated with foreign currency exchange rates, interest rate fluctuations, and substantial indebtedness.
• Potential impacts from activist shareholders, tax exposures, and litigation.
• Risks related to environmental, health, and safety laws, and ESG matters.

Management Commentary and Tone:

• CEO Jeff Simmons described the company as a "consistent, reliable growth company" delivering diverse innovation and accelerating cash flow.
• Management highlighted that organic constant currency revenue growth of 9% was led by International Pet Health (up 17%) and U.S. Pet Health (up 13%).
• CFO Bob VanHimbergen noted significant adjusted gross margin expansion reflecting accelerating price gains and beneficial mix, alongside progress on Elanco Ascend productivity initiatives.
• Management stated that reaching the 2.9x net leverage ratio milestone earlier than anticipated unlocks accelerated capital allocation flexibility.
• The company is recommitting to its annual algorithm of mid-single digit organic constant currency revenue growth, high-single digit Adjusted EBITDA growth, and low-double digit Adjusted EPS growth.

Other Key Points:

• Elanco announced Jamie Preston as Executive Vice President and Chief People Officer effective November 3, 2026, succeeding Dave Kinard who intends to retire.
• The company achieved its highest employee engagement levels since IPO, earning Great Place To Work® certifications in 11 markets.
• AHV International B.V. was acquired on April 30, 2026, contributing to revenue growth.
• Royalty revenue and sales-based milestones sold to a third party totaled $21 million for the three months ended September 30, 2026, compared to $6 million in the prior year.
• The company currently has no plan to pay dividends.