Skip to content
    ELAN
    Earnings call· Mar 2026(Q1 FY26)

    Elanco Animal Health Q1 FY26 earnings call ELAN

    May 6, 2026 Source

    Executive summary

    Elanco Animal Health Q1 FY26 — Strong Innovation-Driven Growth and Raised Full-Year Outlook

    Elanco delivered a strong Q1 FY26, driven by robust performance of its 'Big 6' innovation products and broad-based growth across all major geographies and species. The company raised its full-year revenue, EBITDA, and EPS guidance, reflecting confidence in its innovation pipeline and operational efficiencies from Elanco Ascend, while also improving its net leverage target. Management anticipates continued acceleration in U.S. Pet Health and sustained momentum in Farm Animal segments.

    Highlights

    5

    • Delivered 10% organic constant currency revenue growth in Q1 FY26, outperforming the high end of guidance for revenue, adjusted EBITDA, and adjusted EPS.

    • Raised full-year 2026 innovation target to $1.2 billion, an increase of $50 million, driven by strong performance of 'Big 6' products.

    • Improved year-end 2026 net leverage target to 3.0x to 3.2x from the previous guidance of 3.1x to 3.3x.

    • Raised full-year 2026 organic constant currency growth guidance to 5% to 7% from 4% to 6%.

    • Zenrelia reached blockbuster status on a trailing 4-quarter basis, with its growth trajectory well exceeding expectations.

    Concerns

    3

    • Adjusted gross margin decreased 40 basis points year-over-year in Q1 FY26 to 57% due to pressures from inflation, inventory costs, and product mix.

    • Q2 FY26 organic constant currency revenue growth (4-6%) is impacted by lapping Q2 2025 pre-tariff buying in China and Q1 2026 accelerated shipments to the Middle East.

    • Q2 FY26 operating expenses are expected to increase approximately 8% year-over-year in constant currency, primarily related to launch investments.

    Guidance & targets

    15
    CategoryTargetConfidence
    Full-year 2026 Organic Constant Currency Revenue Growth
    5% to 7%
    high materiality
    High
    Full-year 2026 Adjusted EBITDA
    $975 million to $1.005 billion
    high materiality
    High
    Full-year 2026 Adjusted EPS
    $1.03 to $1.09
    high materiality
    High
    Full-year 2026 Innovation Revenue
    $1.2 billion
    medium materiality
    High
    Year-end 2026 Net Leverage
    3.0x to 3.2x
    high materiality
    High
    Q2 2026 Reported Revenue
    $1.3 billion to $1.325 billion
    medium materiality
    High
    Q2 2026 Organic Constant Currency Revenue Growth
    4% to 6%
    medium materiality
    High
    Q2 2026 Adjusted EBITDA
    $240 million to $260 million
    medium materiality
    High
    Q2 2026 Adjusted EPS
    $0.25 to $0.28
    medium materiality
    High
    U.S. Pet Health Business Growth
    high single-digit to low double-digit growth
    high materiality
    High
    U.S. Pet Health Business Full-Year Revenue Growth
    at least high single-digit revenue growth
    high materiality
    High
    Net Leverage
    below 3x
    high materiality
    High
    Big 6 Products Revenue Growth
    double in revenue
    high materiality
    High
    Free Cash Flow
    more than $1 billion
    medium materiality
    High
    Next Wave Pipeline Approvals
    5 to 6 blockbuster potential approvals
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    U.S. Pet Health
    Achieved 6% growth despite winter storms in January and February, with sharp recovery to 8% growth in March and even better April. Strong trends for products at Costco and Dollar General.
    Zenrelia: leading Q1 growthCredelio Quattro: robust demand, accelerating market share gainsU.S. retail OTC: high single-digit consumption growthSeresto: double-digit dispensing growth at top retailersAdvantage family: double-digit dispensing growth at top retailersZenrelia: over 16,000 U.S. vet clinics (over 50% of total)Zenrelia: reorder rate over 80%Zenrelia: 4,300 new purchasers since September label improvementCredelio Quattro: market share up 3 points since Q4Credelio Quattro: 53% share in clinics carrying it (over 40% of U.S. clinic base)Credelio Quattro: 2,500 new clinics year-to-date through AprilKinetics Puppy Index: Quattro ranks highest vs. other broad-spectrum andectose and grew vs. Q4
    		—6%——
    International Pet Health
    Driven by sales momentum of innovation portfolio including Zenrelia, Adtab, and Credelio. Zenrelia's international labels are without restrictions.
    Zenrelia: rapidly capturing share in $800M international derm marketAdtab: robust growth, sales up >50%Adtab: fastest-growing brand in $600M OTC acto category in EuropeZenrelia: over 50% JAK market share in BrazilZenrelia: over 35% JAK market share in JapanZenrelia: high teens to over 30% JAK market share in key European marketsZenrelia: now in 45 countries
    		—9%——
    U.S. Farm Animal
    Good growth across all species and product categories, driven by cattle and poultry. Expect growth to normalize to long-term algorithm.
    Experior: 55% of U.S. Catalon feed using it
    		—15%——
    International Farm Animal
    Achieved growth across all species, with poultry and ruminants as major contributors. Benefited from customer-driven accelerated shipments primarily to the Middle East, contributing 1 percentage point to total company growth.
    		—13%——

    Operational metrics

    21
    Adjusted gross margin
    57%down 40 bps YoY
    Q1 FY26

    Impacted by inflation, flow-through of inventory costs, and product mix (strong Farm Animal growth). Expect meaningful expansion in H2.

    Operating expenses
    6%YoY increase in constant currency
    Q1 FY26

    Driven by planned investments supporting product launches, R&D, and compensation expense.

    Interest expense
    $43 million
    Q1 FY26

    In line with expectations.

    Adjusted EBITDA
    $334 millionup $58 million or 21%
    Q1 FY26
    Adjusted EPS
    $0.408% increase YoY
    Q1 FY26

    Impacted by lapping favorable one-time tax benefits in prior year.

    Net debt
    $3.3 billion
    Q1 FY26
    Net leverage ratio
    3.5x
    Q1 FY26

    Debt paydown remains primary use of free cash flow. Long-term target 2x to 2.5x.

    Organic constant currency revenue growth
    10%
    Q1 FY26

    Outperformed high end of guidance.

    U.S. corporate accounts growth
    12%vs. same quarter last year
    Q1 FY26

    Driven by Big 6 launches.

    Zenrelia dogs treated
    2 million
    to date
    Zenrelia manufacturing capacity
    24/7 production
    current

    Increased to keep up with sharply rising global demand.

    Elanco Ascend projects
    5,000+
    to date

    Logged to optimize cost structure and drive operational efficiencies.

    Elanco Ascend benefit split
    75%
    future

    Near-term benefits more in G&A due to restructuring.

    Price increase to U.S. vet clinics
    largest in 5 years
    Q1 FY26

    Reflecting innovation and portfolio value.

    Tick bites
    highest rate in nearly a decade
    April CDC data

    Expected to drive robust parasiticide season.

    Derm market growth (international)
    double digit
    current

    Zenrelia rapidly capturing share in $800M market.

    OTC acto category (Europe)
    $600 million
    current

    Adtab is fastest-growing brand.

    U.S. broad-spectrum parasiticide market
    $1.5 billion
    current

    Ample room for Quattro to grow.

    International broad-spectrum parasiticide market
    $750 milliongrowing double digits
    current

    Quattro made debut.

    Next wave pipeline potential
    $2 billion
    peak sales

    Unproblized peak sales potential from 5-6 blockbuster potential approvals through 2031.

    Animal health industry value growth
    $20 billion
    next decade

    Estimated value addition from mid-single-digit growth.

    Industry KPIs

    5
    MetricValueDetails
    Peak sales guidance$2 billionUSD
    EPS revenue guidance$5.01 billion to $5.085 billion (reported revenue); $1.03 to $1.09 (adjusted EPS)USD
    Therapeutic drug market share50%%
    Price volume mix decomposition2% price, 8% volume%
    Geographic regional revenue growth6% (U.S. Pet Health); 9% (International Pet Health); 15% (U.S. Farm Animal); 13% (International Farm Animal)%

    Product announcements

    1
    ProductTypeDetails
    Befrenalaunch

    Deals & partnerships

    1
    AHV InternationalExpands share of voice in dairy and provides a platform for farm animal innovation.

    Acquisition closed on April 30. Welcomes new colleagues.

    Risks & headwinds

    6
    Heightened competitive pressures, including generics

    Could move results toward the lower end of our expectations.

    Mitigation: Continued investment in innovation products, driving market share gains and sustainable growth.

    Consumer level economic shifts

    Could move results toward the lower end of our expectations.

    Mitigation: Comprehensive portfolio, diverse product offerings, and focus on value.

    Q2 revenue impact from lapping prior year's pre-tariff buying in ChinaQ2 2026

    Impacted Q2 organic constant currency revenue growth (4-6%).

    Q2 revenue impact from accelerated shipments to Middle East in Q1Q2 2026

    Impacted Q2 organic constant currency revenue growth (4-6%).

    Q2 revenue impact from Farm Animal normalization against more challenging comparisonsQ2 2026

    Impacted Q2 organic constant currency revenue growth (4-6%).

    Q2 operating expenses increaseQ2 2026

    Approximately 8% in constant currency.

    Mitigation: Primarily related to launch investments, expected to drive future growth.

    What to watch in Q2 FY26

    5

    Zenrelia U.S. label update

    Next quarter (updates on study progress), year-end 2026 (submission).
    CurrentNew study underway, submission by year-end 2026.
    TargetFDA decision or further clarity on label expansion.

    Why it matters

    Potential for significant upside to Zenrelia's growth trajectory in the U.S. beyond current conservative guidance.

    They requested this additional data, and we've already started the trials along the way. We've got good concurrence on the study, and we'll be submitting it by the end of the year, Michael. But given Zenrelia's success that's well beyond our plans, we now have greater expectations for the potential of this product, with additional label improvement in the U.S. really representing just further possible upside.

    Q&A highlights

    5

    What factors held back U.S. Pet Health in early Q1, and what are the main drivers for the expected acceleration, especially given the low base for Quattro in Q1 '25?

    Jeff Simmons attributed early Q1 softness to winter storms but highlighted a strong rebound in March (8% growth) and April. Key drivers for acceleration are Zenrelia and Quattro momentum, the upcoming Befrena launch, and strategic pricing. The retail business, including new customers like Costco and Dollar General, also contributed significantly.

    “Look, we had, I think, like the whole industry, January and February, that was cooler, but we saw a really nice rebound and all the lead indicators on our new products were extremely strong. So an 8% jump back in March, even stronger in April.”

    asked by John Block · answered by Jeffrey Simmons

    2 min read6 chapters

    Detailed Narrative

    01

    Innovation-Driven Growth and Market Share Gains

    Elanco's 'Big 6' innovation products, particularly Zenrelia and Credelio Quattro, were the primary drivers of the 10% organic constant currency revenue growth in Q1 FY26. Zenrelia achieved blockbuster status on a trailing 4-quarter basis, exceeding expectations, and is rapidly gaining market share in the global dermatology market. Credelio Quattro's market share increased 3 points since Q4, reaching 53% in clinics that carry the product, demonstrating strong demand and positioning for the parasiticide season.

    02

    U.S. Pet Health Acceleration

    Despite initial softness in January and February due to winter storms, the U.S. Pet Health business saw a sharp recovery in March (8% growth) and April, indicating underlying strength. Management is confident in an expected acceleration to high single-digit to low double-digit growth in the second half of the year, driven by continued momentum from Zenrelia and Credelio Quattro, and contributions from the upcoming Befrena launch. This outlook is not contingent on improvements in vet visit volumes.

    03

    Robust Farm Animal Performance

    The Farm Animal business delivered strong results, with U.S. Farm Animal revenue up 15% and International Farm Animal up 13% in organic constant currency. This performance is attributed to a 'protein revolution' driving demand across cattle, poultry, and dairy segments. The recent acquisition of AHV International further strengthens Elanco's portfolio in dairy, and the company expects continued durable growth in this segment.

    04

    Elanco Ascend and Operational Efficiency

    Elanco's productivity initiative, Elanco Ascend, is progressing well with over 5,000 projects logged to date. The program aims to optimize cost structure and drive operational efficiencies, with 75% of the projected benefits expected in gross margin, and near-term benefits in G&A. Elanco Ascend is integrating automation and AI across the value chain to accelerate innovation, enhance manufacturing quality, and drive sales, contributing to long-term margin expansion.

    05

    Strategic Pricing and Corporate Account Engagement

    Elanco implemented its largest price increase in five years to U.S. vet clinics, reflecting the enhanced value of its innovation portfolio. The company also reported a 12% growth in U.S. corporate accounts in Q1, indicating a strong 'pull' for its products from these key customers. This strategic approach to pricing and distribution is contributing to market share gains and overall growth.

    06

    Future Pipeline and Industry Outlook

    Elanco is actively advancing its next wave pipeline, targeting 5 to 6 new blockbusters by 2031, with an estimated $2 billion in unproblized peak sales potential. The company remains optimistic about the durable animal health industry, anticipating mid-single-digit growth and an estimated $20 billion in added industry value over the next decade, supported by mega-trends in pet care and protein consumption.

    AI-generated summary of the company’s earnings call. Not investment advice.