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    ELAN
    Earnings call· Jun 2026(Q2 FY26)

    Elanco Animal Health Q2 FY26 earnings call ELAN

    Aug 5, 2026 Source

    Executive summary

    Elanco Q2 FY26 — Strong Innovation-Led Growth and Raised Full-Year Outlook

    Elanco delivered robust Q2 FY26 results, driven by strong innovation in U.S. Pet Health and Farm Animal segments, leading to an 8% organic constant currency revenue growth. The company raised its full-year outlook for revenue, adjusted EBITDA, and adjusted EPS, while accelerating net leverage reduction. Management emphasized the durability of the animal health market and the effectiveness of its IPP strategy, despite shifts in pet owner purchasing behaviors.

    Highlights

    5

    • Organic constant currency revenue grew 8%, outperforming the high end of guidance.

    • U.S. Pet Health and U.S. Farm Animal revenue both increased 11%.

    • Innovation revenue target raised to $1.25 billion for FY26.

    • Adjusted EBITDA increased 21% to $288 million.

    • Net leverage ratio improved to 3.1x, approaching the sub-3x target faster than planned.

    Concerns

    3

    • International Farm Animal organic constant currency growth was 2% due to timing of certain shipments in Q1 2026.

    • Befrena supply anticipated to reach unconstrained levels only in early 2027 due to high demand.

    • Operating expenses were up 10% in constant currency, driven by targeted DTC support and R&D.

    Guidance & targets

    14
    CategoryTargetConfidence
    Full-year organic constant currency revenue growth
    6% to 7%
    high materiality
    High
    Full-year revenue
    $5.09 billion to $5.4 billion
    high materiality
    High
    Full-year adjusted EBITDA
    $1.01 billion to $1.035 billion
    high materiality
    High
    Full-year adjusted EPS
    $1.10 to $1.16
    high materiality
    High
    Year-end net leverage ratio
    approximately 3x
    high materiality
    High
    Q3 revenue
    $1.195 billion to $1.22 billion
    medium materiality
    High
    Q3 adjusted EBITDA
    $200 million to $250 million
    medium materiality
    High
    Q3 adjusted EPS
    $0.19 to $0.22
    medium materiality
    High
    Long-term gross margin
    60%
    high materiality
    High
    Long-term net leverage target
    2x to 2.5x
    high materiality
    High
    Innovation revenue
    approximately $1.25 billion
    high materiality
    High
    Elanco Ascend adjusted EBITDA savings
    $200 million to $250 million
    high materiality
    High
    Next Wave blockbuster potential innovations
    5 to 6
    high materiality
    High
    U.S. Pet Health full-year revenue growth
    at least high single-digit
    medium materiality
    High

    Segment performance

    7
    SegmentRevenueYoYQoQMargin
    Total Pet Health
    Organic constant currency growth: 11%
    		—11%——
    U.S. Pet Health
    Strong momentum in vet and retail channelsLed by Zenrelia and Credelio QuattroSeresto led top line growth in retail OTCAchieved share gains across derm, para, osteoarthritis pain, and vaccines
    		—11%——
    International Pet Health
    Organic constant currency growth: 9%Led by Zenrelia, AdTab, and Credelio
    		—9%——
    Total Farm Animal
    Organic constant currency growth: 5%
    		—5%——
    U.S. Farm Animal
    Broad strength across all three speciesBeef cattle led by Experior
    		—11%——
    International Farm Animal
    Organic constant currency growth: 2%Ruminant and poultry contributingImpacted by accelerated shipments to Middle East in Q1 2026Year-to-date growth: 7%
    		—2%——
    Global Ruminants
    Organic constant currency growth: 12%Including AHV and FX
    		—17%——

    Operational metrics

    41
    Organic constant currency revenue growth
    8%
    Q2 FY26

    Outperformed high end of guidance.

    Volume contribution to revenue growth
    6%
    Q2 FY26

    Contributed to 8% organic constant currency revenue growth.

    Price contribution to revenue growth
    2%
    Q2 FY26

    Contributed to 8% organic constant currency revenue growth.

    Innovation revenue (Big 6)
    $340 million
    Q2 FY26

    From innovation on top of a stable base.

    Innovation revenue target
    $1.25 billionraised by $50 million
    FY26

    Raised for full year 2026.

    Zenrelia dogs treated
    Over 2.5 million
    Q2 FY26

    Reflects growth trajectory and rapid share gains.

    Zenrelia U.S. clinic penetration
    Approximately 18,000
    Q2 FY26

    Greater than 60% of the total clinic base.

    Zenrelia reorder rate
    Over 80%
    Q2 FY26

    Maintained reorder rate.

    Zenrelia international presence
    47
    Q2 FY26

    All without label restrictions.

    Befrena commercial product shipped
    Approximately 1,400
    Q2 FY26

    Soft launched in May ahead of allergy season.

    Befrena demand vs expectations
    Double
    Q2 FY26

    Higher customer demand than expectations.

    AdTab sales growth
    Over 30%
    Q2 FY26

    Continued rapid climb toward blockbuster status.

    AdTab market position
    Fastest-growing brand
    Q2 FY26

    In the nearly $600 million OTC Acto category in Europe.

    Experior growth
    Double digits
    Q2 FY26

    Grew double digits in the quarter.

    Elanco Ascend adjusted EBITDA savings target
    $200 million to $250 million
    by 2030

    Total adjusted EBITDA savings, net of inflation and program reinvestment.

    Adjusted gross margin
    58.1%80 basis point improvement
    Q2 FY26

    Driven by favorable product mix and Elanco Ascend acceleration.

    Operating expenses growth
    10%
    Q2 FY26

    Driven by targeted DTC support for new product launches and R&D initiatives.

    Interest expense
    $44 million
    Q2 FY26

    Consistent with expectations.

    Adjusted EBITDA
    $288 million21% increase YoY
    Q2 FY26

    Increase of $50 million.

    Adjusted EPS
    $0.3431% increase YoY
    Q2 FY26

    Per share.

    Net debt decrease
    Approximately $90 million
    since start of year

    Resulted in a half turn reduction in leverage.

    Net leverage ratio
    3.1x
    Q2 FY26

    Approaching target of sub-3x next year.

    Full-year adjusted EBITDA margin improvement
    Approximately 75 basis pointsyear-over-year
    FY26

    Includes 50 basis points of gross margin benefit.

    Gross margin benefit to full-year adjusted EBITDA margin
    50 basis points
    FY26

    Part of the 75 basis points year-over-year improvement.

    U.S. Pet Health industry growth
    Mid-single digits
    trailing 4 quarters through Q1

    With resilient pet owner spend and rational pricing.

    Vet home delivery sales growth vs in-clinic
    Nearly twice as fast
    Q2 FY26

    Data indicates vet home delivery sales are growing nearly twice as fast as in clinic sales.

    U.S. Pet Health industry growth
    5%
    2025

    Led by derm and broad-spectrum parasiticides.

    OTC flea and tick category growth
    Over 4%
    year-to-date

    Solid consumption trends at retail.

    Pet owners not cutting spending on pet health
    95%
    surveyed

    Of surveyed owners said they would not cut spending on pet health.

    Pet owners maintaining/increasing spending
    90%
    surveyed

    Expect to maintain or increase spending over the next year.

    Pricing acceleration in U.S. Pet Health
    Accelerated
    Q1 to Q2

    Expected to continue in the back half of the year.

    Animal Health industry expansion
    From $40 billion to $60 billion
    into the next decade

    Driven by increased global protein consumption, international humanization of pets, and increased care seeking.

    Big 6 expected growth
    Double in size
    over the next 3 years

    Offers significant runway ahead.

    U.S. corporate account sales
    300
    YTD

    Year-to-date sales ahead of total U.S. pet health.

    U.S. Pet Health pricing increase
    Largestin 5 years
    start of 2026

    Innovation allowed for the largest price increase in 5 years.

    Derm and broad-spectrum parasiticides growth
    Strong double-digit
    Q2 FY26

    Markets are growing.

    Derm and broad-spectrum parasiticides growth
    Low single to mid-single-digit
    Q2 FY26

    Markets are growing.

    Broad spectrum market size
    $1.5 billion
    Q2 FY26

    Continuing to grow.

    European OTC Acto category size
    Nearly $600 million
    Q2 FY26

    Market for AdTab.

    International broad-spectrum market size
    Nearly $800 million
    Q2 FY26

    Growing double-digits, where Credelio Quattro is launching.

    Beef cattle replacement
    1%
    year-on-year

    Tick up in replacement cattle.

    Industry KPIs

    7
    MetricValueDetails
    EPS revenue guidance$1.10 to $1.16USD
    Pipeline clinical milestones5 to 6blockbuster potential innovations
    Regulatory approvals filingsFDA conditional approval
    Therapeutic drug market share9 pointspoints
    Price volume mix decomposition6% volume, 2% price%
    Geographic regional revenue growth12%%
    Clinical trial efficacy safety datafaster speed

    Product announcements

    2
    ProductTypeDetails
    Befrenalaunch
    Credelio Quattroexpansion

    Deals & partnerships

    1
    AHP InternationalAcquisition to build on global ruminant success.

    Recently closed acquisition, building on global ruminant success.

    Risks & headwinds

    5
    International Farm Animal shipment timingQ2 FY26

    International farm animal grew 2% in organic constant currency.

    Mitigation: Year-to-date growth of 7% shows strong underlying fundamentals.

    Befrena supply constraintsAnticipate supply reaching unconstrained levels in early 2027.

    Demand is double the size of our expectations.

    Mitigation: Ramping capacity to meet higher customer demand; using a gating demand system.

    Inflationary pressuresFirst half FY26

    Muted growth from inflationary pressures and the high cost of inventory flowing through in the first half.

    Mitigation: Elanco Ascend acceleration and favorable product mix are offsetting; flushed out in H2.

    Challenging comparisons for ExperiorGoing forward

    Anticipate moderating growth rates against challenging comparisons.

    Mitigation: Expect Experior to continue to grow and provide portfolio synergies with multiple levers from extending days of use, continued adoption and price.

    Competitive spend to gain shareOngoing

    Spend is going up to get share.

    Mitigation: Elanco's share of voice and competitiveness has increased with competitive reps, multimedia, and distribution partners.

    What to watch in Q3 FY26

    5

    Befrena supply ramp-up

    Early 2027
    CurrentGated demand, supply ramping
    TargetUnconstrained supply

    Why it matters

    Unlocks significant demand and corporate account penetration for a key derm innovation.

    Given the robust demand, we anticipate supply, reaching unconstrained levels in early 2027.

    Q&A highlights

    6

    Asked about pricing trends in derm and para given competitive concerns, and how Elanco maintains pricing power.

    Jeff Simmons stated the market remains responsible on pricing, allowing price increases with portfolio value and differentiation. Noted a competitor recently took a mid-season price increase. Elanco's U.S. Pet Health pricing accelerated in Q2 and is expected to continue in H2. Competition is increasing spend to gain share, but Elanco's competitive position is stronger due to reps, multimedia, and distribution partners.

    “We're seeing no change. If anything, in Q2, it's probably been more responsible. I'll point to just in the last 2 weeks, we've seen a competitor actually mid-season take a map price increase, which shows, hey, they believe that a pet owner is resilient and will spend and that, hey, pricing is not where you're going to get changes.”

    asked by Glen Santangelo · answered by Jeffrey Simmons

    2 min read6 chapters

    Detailed Narrative

    01

    Innovation-Driven Growth

    Elanco's Q2 performance was significantly boosted by its "Big 6" innovation products, particularly Zenrelia and Credelio Quattro, which contributed $340 million in revenue. The company raised its full-year innovation revenue target to $1.25 billion, reflecting strong market share gains and growth in key global markets. This innovation strategy is seen as a key differentiator in a dynamic market.

    02

    Omnichannel Strategy and Pet Health Market Dynamics

    Despite concerns about U.S. vet visit volumes, Elanco demonstrated strong growth in U.S. Pet Health (up 11%) through its comprehensive portfolio and omnichannel approach, including vet clinics, online, and retail. Management highlighted a shift in pet owner buying behaviors towards more diverse channels, with vet home delivery growing nearly twice as fast as in-clinic sales, and resilient pet owner spending.

    03

    Farm Animal Segment Strength

    The Farm Animal segment also showed robust performance, with U.S. Farm Animal up 11% and Global Ruminants up 17% reported. This growth is supported by strong consumer demand for high-quality, sustainable animal protein, reinforcing the long-term value of the farm animal business and the "protein revolution."

    04

    Elanco Ascend and Margin Expansion

    The Elanco Ascend program is accelerating, contributing to an 80 basis point improvement in adjusted gross margin to 58.1% in Q2. The program, focusing on procurement, pricing, organizational optimization, and automation, is on track to deliver $200 million to $250 million in adjusted EBITDA savings by 2030, supporting a clear path to a 60% long-term gross margin.

    05

    Balance Sheet Discipline and Capital Allocation

    Strong operational performance and a $90 million net debt reduction led to a half-turn decrease in leverage since the start of the year, reaching 3.1x. The company anticipates a net leverage ratio of approximately 3x by year-end, which will unlock greater capital allocation flexibility towards its long-term target of 2x to 2.5x.

    06

    Pipeline Confidence

    Elanco expressed increased confidence in its "Next Wave" portfolio, expecting 5 to 6 blockbuster potential innovations through 2031. The R&D team has enhanced the number and value of projects, leveraging AI and strategic partnerships to ensure a consistent flow of high-impact innovations.

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