Elanco Animal Health Reports Third Quarter 2026 Results
Elanco Animal Health Reports Third Quarter 2026 Results |
| [06-November-2026] |
Accelerated Price, Organic Constant Currency Revenue Growth, and Gross Margin Expansion; Raising Full Year Outlook and Innovation Target; Achieved 2.9x Net Leverage Ratio Milestone
INDIANAPOLIS, Nov. 6, 2026 /PRNewswire/ -- Elanco Animal Health Incorporated (NYSE: ELAN) today reported financial results for the third quarter of 2026, provided guidance for the fourth quarter of 2026, updated guidance for the full year 2026, and provided an early outlook for the full year 2027.
"Third quarter results demonstrate Elanco is a consistent, reliable growth company, delivering our diverse portfolio of innovation along with accelerating cash flow," stated Jeff Simmons, President and CEO of Elanco. "Organic constant currency revenue growth of 9% was led by International Pet Health up 17% and U.S. Pet Health up 13%, as we saw strong veterinarian and pet owner demand for what we believe is 'best medicine' innovation for our 'Big 6' growth led by Zenrelia and Credelio Quattro. Price accelerated to 4% growth, exceeding our expectations, while volume remained robust at 5%. Our durable top-line is fueled by a significant runway for share gains off a small base in large, growing, global markets. Both Zenrelia and Credelio Quattro reached new market share highs in September, with competitive activity having no fundamental impact on the trajectory of our innovation. At the same time, adjusted gross margin expanded 300 basis points, we invested in our commercial execution, and we drove our net leverage ratio to the 2.9x milestone which accelerates our capital allocation flexibility. As we are raising full-year guidance to fully pass through the third quarter beat, Elanco is well positioned with momentum heading into 2027. We are recommitting to our annual algorithm of mid-single digit organic constant currency revenue growth, high-single digit adjusted EBITDA growth, and low-double digit adjusted EPS growth, building on this year's expected outperformance and creating sustainable value for our customers, our shareholders, and the industry." Select Business Highlights Since the Last Earnings Call
**Per Kynetec data Financial Results
In the third quarter of 2026, revenue was $1,265 million, an increase of 11% on a reported basis, or 9% on an organic constant currency basis, compared to the third quarter of 2025. Pet Health revenue was $608 million, an increase of 14% on both a reported and an organic constant currency basis. The 5% increase from price exceeded the company's expectation for acceleration. The year-over-year volume increase of 9% in the third quarter was primarily driven by strong demand for Zenrelia, Credelio Quattro and AdTab™. The Advantage® Family of products and Seresto® Family of products contributed revenue of $115 million and $49 million, respectively; Seresto was negatively impacted by U.S. retailer inventory draw down, with underlying performance in line with expectations. Farm Animal revenue was $631 million, an increase of 6% on a reported basis, or 4% on an organic constant currency basis. The year-over-year reported increase was primarily driven by a 3% increase in price during the period and a 2% contribution from AHV. Gross profit was $720 million and gross margin percentage was 56.9% in the third quarter of 2026, an increase of 350 basis points compared to the third quarter of 2025. On an adjusted basis, gross profit was $699 million and gross margin percentage was 56.1% in the third quarter of 2026, an increase of 300 basis points compared to the third quarter of 2025. The increase in gross margin percentage on both a reported and adjusted basis, which was ahead of the company's expectations, was primarily driven by increased pricing and favorable mix from the strong performance in U.S. Pet Health and global ruminants. Total operating expenses were $492 million for the third quarter of 2026, an increase of 12% compared to the third quarter of 2025. Marketing, selling and administrative expenses increased 12% to $393 million, driven by higher compensation expense and strategic investments in the global launches of new products. Research and development expenses increased 11% to $99 million. Asset impairment, restructuring and other special charges were $3 million in the third quarter of 2026, compared to $25 million in the third quarter of 2025. Charges recorded in the third quarter of 2026 primarily related to the company's 2025 restructuring plan as well as costs associated with the acquisition of AHV. Reported net interest expense was $59 million in the third quarter of 2026, an increase of $7 million compared to the third quarter of 2025. The increase was principally due to the maturity of interest rate swaps in September 2025, which generated a favorable impact to interest expense in the prior year period, as well as imputed interest on our liability for sale of future revenue. These increases were partially offset by lower average debt balances. Adjusted net interest expense, which excludes this imputed interest, was $41 million in the third quarter of 2026, an increase of $7 million compared to the third quarter of 2025. The reported effective tax rate was 25.7% in the third quarter of 2026 compared to 30.9% in the third quarter of 2025. This decrease was primarily due to a more favorable jurisdictional mix of earnings and the absence of prior-year discrete tax changes. The adjusted effective tax rate was 19.4% in the third quarter of 2026 compared to 26.5% in the third quarter of 2025. Net income for the third quarter of 2026 was $18 million, or $0.04 per diluted share on a reported basis, compared with net loss of $34 million, or $0.07 per diluted share, for the same period in 2025. On an adjusted basis, net income for the third quarter 2026 grew 45% compared to the same period in 2025 to $136 million, representing $0.27 per diluted share. Adjusted EBITDA was $243 million in the third quarter of 2026, a 23% increase compared to the third quarter of 2025. Adjusted EBITDA margin was 19.5% compared with 17.5% for the third quarter of 2025. Working Capital and Balance Sheet Cash provided by operations was $216 million in the third quarter of 2026, compared to cash provided by operations of $219 million in the third quarter of 2025. As of September 30, 2026, Elanco's net leverage ratio was 2.9x adjusted EBITDA, a decrease of 0.7x compared to December 31, 2025. Financial Guidance Elanco is updating financial guidance for the full year 2026, summarized in the following table:
"Elanco achieved significant adjusted gross margin expansion in the third quarter, up 300 basis points reflecting accelerating price gains to 4% year-over-year and beneficial mix, as well as early progress on our Elanco Ascend productivity initiatives," said Bob VanHimbergen, Executive Vice President and CFO of Elanco Animal Health. "At the same time, we have continued our high-ROI investments in our launches. Our consistent top-line growth and improved profitability, alongside working capital discipline, have increased free cash flow and brought our net leverage ratio to 2.9x at quarter-end. Reaching this key milestone earlier than anticipated now unlocks accelerated capital allocation flexibility." The company anticipates a tailwind to revenue of approximately $60 million from the favorable impact of foreign exchange rates compared to prior year. Excluding the impacts of foreign exchange rates, the AHV International acquisition that closed in April 2026, and royalty revenue and sales-based milestones sold to a third party, the company now expects revenue growth of approximately 8% versus 6% to 7% previously. The company continues to expect an accelerating contribution from price versus 2025. Elanco expects adjusted gross margin of 55.8% to 56.0%, an increase of 100 basis points versus 2025 and compared to the prior expectation of 50 basis points of improvement. Adjusted EBITDA guidance reflects savings from the Elanco Ascend initiative as well as incremental strategic investments in the global launches of the company's innovation portfolio and the advancement of the R&D pipeline. Additionally, the company is providing guidance for the fourth quarter of 2026, as summarized in the following table:
In the fourth quarter, the company anticipates a minimal impact from foreign exchange rates compared to prior year. Excluding the impacts of foreign exchange rates, the AHV International acquisition that closed in April 2026, and royalty revenue and sales-based milestones sold to a third party, the company expects 4% to 6% revenue growth. The company expects operating expenses up approximately 11% year-over-year in constant currency with incremental support for innovation products and R&D investments. The 2026 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 DETAILS Elanco 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 2026 financial guidance, provide an early outlook for the full year 2027, 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/news-events/events-presentation. 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 more than 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 – 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 2026 full year and fourth 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:
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 growth excluding the impact of acquisitions and divestitures, foreign exchange rate effects, royalty revenue and sales-based milestones sold to third party, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted EPS, adjusted gross profit, adjusted gross margin, net debt 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 U.S. generally accepted accounting principles (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 GAAP results include the following: (i) they may not be comparable to similarly titled measures used by other companies, including those in our industry, (ii) they exclude financial information and events, such as the effects of an acquisition or divestiture or amortization of intangible assets, that some may consider important in evaluating our performance, value or prospects for the future, (iii) they exclude items or types of items that may continue to occur from period to period in the future and (iv) they may not exclude all unusual or non-recurring items, which could increase or decrease these measures, which investors may consider to be unrelated to our long-term operations. These non-GAAP measures are not, and should not, be viewed as substitutes for GAAP reported measures. We encourage investors to review our unaudited consolidated financial statements in their entirety and caution investors to use GAAP measures as the primary means of evaluating our performance, value and prospects for the future, and non-GAAP measures as supplemental measures. 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 our website. Additional Information We define innovation revenue as revenue from new products, lifecycle management and certain geographic expansions and business development transactions that is incremental in reference to product revenue in 2020 and does not include the expected impact of cannibalization on the base portfolio. We define organic constant currency revenue growth as revenue growth excluding royalty revenue and sales-based milestones that were sold to a third party, the impact of foreign exchange rates, and revenue attributable to AHV International B.V., which was acquired on April 30, 2026.
Elanco Animal Health Incorporated We use non-GAAP financial measures, such as organic constant currency revenue growth, adjusted gross profit, adjusted gross margin percentage, adjusted net income, adjusted EPS, EBITDA, adjusted EBITDA and adjusted EBITDA margin and net debt and net debt leverage, that differ from financial measures reported in conformity with GAAP. The company believes these non-GAAP measures provide useful information to investors. Among other things, they may help investors assess and analyze our operational results and trends of our ongoing operations. Management also uses these non-GAAP measures internally to evaluate the performance of the business and in making resource allocation decisions. Investors should consider these non-GAAP measures in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. Reconciliation of non-GAAP financial measures and reported GAAP financial measures are included in the tables below. Adjusted Gross Profit and Gross Margin Percentage We define gross profit as total revenue less cost of sales. We define adjusted gross profit as gross profit less royalty revenue and sales-based milestones sold to a third party, less cost of sales adjustments. We define adjusted gross margin percentage as adjusted gross profit divided by total revenue, less royalty revenue and sales-based milestones sold to a third party. The following is a reconciliation of GAAP reported gross profit for the three and nine months ended September 30, 2026 and 2025, to adjusted gross profit and adjusted gross margin percentage:
Adjusted Net Income and Earnings Per Share We define adjusted net income as net income excluding amortization of intangible assets, purchase accounting adjustments to inventory, acquisition and divestiture-related charges, including integration and separation costs, severance, goodwill and other asset impairments, gains on sales of assets and related costs, facility exit costs, the impacts from sales of future revenues, gains and losses on mark-to-market adjustments on equity securities, tax valuation allowances, certain litigation-related settlements that we consider to be unusual or infrequent and significant, 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 earnings per share as adjusted net income divided by the number of weighted-average diluted shares outstanding for the applicable period. The following is a reconciliation of GAAP reported net income and EPS for the three months ended September 30, 2026 and 2025, to adjusted net income and EPS:
The following is a reconciliation of GAAP reported net income and EPS for the nine months ended September 30, 2026 and 2025, to adjusted net income and EPS:
Adjusted EBITDA and Adjusted EBITDA Margin We define adjusted EBITDA as net income (loss) adjusted for interest expense (income), which includes debt financing charges and imputed interest on our liability for sale of future revenue, income tax expense (benefit) and depreciation and amortization, further adjusted to exclude purchase accounting adjustments to inventory, acquisition and divestiture-related charges, including integration and separation costs, severance, goodwill and other asset impairments, gains on sales of assets and related costs, facility exit costs, revenue sold to a third party, gains and losses on mark-to-market adjustments on equity securities, certain litigation-related settlements which we consider to be unusual or infrequent and significant, and other specified significant items, such as unusual or non-recurring items that are unrelated to our long-term operations. 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 GAAP and its reconciliation to net income (loss), enhances investors' understanding of our performance, valuation and prospects for the future. We also believe adjusted EBITDA is a measure used in the animal health industry by analysts as a valuable performance metric for investors. The following is a reconciliation of GAAP reported net income (loss) for the three and nine months ended September 30, 2026 and 2025, to EBITDA, adjusted EBITDA and adjusted EBITDA margin, which we define as adjusted EBITDA divided by total revenue, less royalty revenue and sales-based milestones sold to a third party, for the respective periods:
Gross and Net Debt and Net Leverage Ratio 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 net debt as gross debt less cash and cash equivalents and finance lease liabilities on the balance sheet. We define our net leverage ratio as net debt divided by our trailing twelve month adjusted EBITDA. We believe our net debt and net leverage ratio are important measures to monitor our financial flexibility, liquidity and capital structure and may enhance investors' understanding of our ability to meet future financial obligations. In addition, a net leverage ratio is a financial measure that is frequently used by investors and creditors. The below calculations do not include covenant-related adjustments that reduce our net leverage ratio. The following is a reconciliation of gross debt to net debt as of September 30, 2026:
The following table presents a calculation of our net leverage ratio as of September 30, 2026:
Investor Contact: Tiffany Kanaga (765) 740-0314 or tiffany.kanaga@elancoah.com
SOURCE Elanco Animal Health | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Company Codes: NYSE:ELAN | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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