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    ELAN
    Earnings call· Dec 2025(Q4 FY25)

    Elanco Animal Health Q4 FY25 earnings call ELAN

    Feb 24, 2026 Source

    Executive summary

    Elanco Q4 FY25 — Strong Innovation-Led Growth and Accelerated Deleveraging

    Elanco delivered a strong Q4 FY25, driven by 9% organic constant currency revenue growth and significant contributions from new product innovation, particularly Credelio Quattro and Zenrelia. The company exceeded its financial guidance and accelerated deleveraging, positioning it for continued growth and margin expansion in FY26, supported by its "no-regrets" launch strategy and productivity initiatives.

    Highlights

    5

    • Organic constant currency revenue grew 9% in Q4 FY25, outperforming the high end of guidance.

    • Innovation revenue reached $892 million in FY25, exceeding expectations, with a raised 2026 outlook to $1.15 billion.

    • Net leverage ratio improved faster than planned to 3.6x at year-end FY25, with a target of 3.1x-3.3x by end of FY26.

    • U.S. Pet Health gained share in every major category (prescription parasiticides, osteoarthritis pain, dermatology, vaccines) for full year FY25.

    • Zenrelia achieved double-digit market share in several key international markets (Brazil 40%, Japan >30%) and strong early traction in Europe.

    Concerns

    3

    • Adjusted EPS decreased 7% year-over-year in Q4 FY25 to $0.13, driven by an anticipated higher tax rate.

    • Cash generated from operations was $108 million in Q4 FY25, down from $177 million in the prior year, reflecting expected cash tax payments related to the Aqua divestiture.

    • Adjusted gross margin in Q1 FY26 is expected to decline year-over-year due to the timing of inflation and the flow-through of higher inventory costs.

    Guidance & targets

    16
    CategoryTargetConfidence
    Full year organic constant currency revenue growth
    4% to 6%
    high materiality
    High
    Full year revenue
    $4.95 billion to $5.02 billion
    high materiality
    High
    Full year adjusted EBITDA
    $955 million to $985 million
    high materiality
    High
    Full year adjusted EPS
    $1 to $1.06
    high materiality
    High
    Innovation revenue
    $1.15 billion
    high materiality
    High
    Net leverage ratio
    3.1x to 3.3x
    high materiality
    High
    Net leverage ratio
    sub-3x
    high materiality
    High
    Big 6 revenue
    double
    high materiality
    High
    Next wave innovation approvals
    5 to 6 blockbuster potential approvals
    medium materiality
    High
    Adjusted gross margin
    up approximately 40 basis points
    medium materiality
    High
    Operating expenses (OpEx)
    up 7%
    medium materiality
    High
    Elanco Ascend savings
    $25 million
    medium materiality
    High
    Q1 organic constant currency revenue growth
    4% to 6%
    medium materiality
    High
    Q1 revenue
    $1.28 billion to $1.305 billion
    medium materiality
    High
    Q1 adjusted EBITDA
    $290 million to $310 million
    medium materiality
    High
    Q1 adjusted EPS
    $0.33 to $0.36
    medium materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Global Pet Health
    Constant currency growth during Q4 FY25.
    		—9%——
    U.S. Pet Health
    Driven by demand for key innovation products, Credelio Quattro and Zenrelia, and led to gaining share in every major category for the full year.
    Share gains: every major category (prescription parasiticides, osteoarthritis pain, dermatology, vaccines) for full year 2025Credelio Quattro clinic penetration: ~1/3 of clinicsZenrelia clinic penetration: ~50% of clinicsZenrelia reorder rate: >80%
    		—10%——
    International Pet Health
    Constant currency growth, led by Zenrelia, Credelio, and Adtab. Zenrelia exceeding expectations in the $700M+ international market.
    Zenrelia market share in Brazil: 40%Zenrelia market share in Japan: >30%Zenrelia market share in France: double-digitZenrelia market share in Italy: double-digitZenrelia market share in Spain: double-digitZenrelia market share in UK: >10%Adtab sales growth: >50%Adtab oral OTC share in Europe: >50%
    		—8%——
    Global Farm Animal
    Organic constant currency growth in Q4 FY25.
    		—10%——
    U.S. Farm Animal
    Driven by the strength of Experior, Pradalex, and poultry vaccines, building on market leadership.
    Cattle herd retention: turned positive for first time since January 2017Experior sales: >$200M in 2025Experior sales growth FY25: ~80%Experior sales growth Q4: 35%
    		—17%——
    International Farm Animal
    Organic constant currency growth, coming from ruminants, swine, and poultry across Europe, Latin America, and APAC region.
    		—4%——

    Operational metrics

    33
    Adjusted EBITDA
    $189Mup 7%
    Q4 FY25

    Compared to the prior year.

    Adjusted EPS
    $0.13down 7%
    Q4 FY25

    Driven by an anticipated higher tax rate.

    Adjusted gross margin
    51.2%up 30 bps
    Q4 FY25
    Operating expenses
    up 10%constant currency
    Q4 FY25

    Supports strategic investment in global Pet Health product launches and R&D pipeline development.

    Interest expense
    $47Mup 2%
    Q4 FY25

    Compared to the same period last year, impacted by the expiration of a favorable interest rate swap amortization benefit.

    Adjusted EBITDA
    $901M
    FY25
    Adjusted EPS
    $0.94vs $0.91 in 2024
    FY25
    Effective tax rate
    21.8%up 370 bps
    FY25

    Primarily due to the recognition of nonrecurring tax credits in 2024.

    Cash generated from operations
    $108Mvs $177M in prior year
    Q4 FY25

    Reduction reflects expected cash tax payments related to the 2024 Aqua divestiture.

    Net debt
    $3.2B
    Year-end FY25
    Net leverage ratio
    3.6ximproved by 2 turns in 2 years
    Year-end FY25
    Organic constant currency revenue growth
    9%
    Q4 FY25
    Innovation revenue
    $892M
    FY25

    Outperformed expectations.

    Organic constant currency revenue growth
    7%
    FY25

    With balanced contributions across species and geographies, and between volume and price.

    Price growth
    2%
    FY25

    In line with expectations.

    Total revenue
    $4.715Bup 6%
    FY25
    Credelio Quattro clinics penetrated
    ~1/3
    Current

    Approximately 10,000+ clinics.

    Credelio Quattro clinics adding additional products
    2,600
    Current

    Clinics that have actually by purchasing Quattro are now adding on additional products.

    Zenrelia dogs treated globally
    >1M
    Current
    Zenrelia new purchasers (clinics)
    2,500
    Since September label update
    Adtab oral OTC share
    >50%
    Current

    Became #1 in less than 2 years in the $600M OTC ecto market.

    Experior estimated potential market
    >$350M
    Future

    Through extending days of use, continued adoption, price, and geo expansion.

    Bovaer farmer retention
    >90%
    Current
    Corporate accounts growth
    90%vs 13% in 2024
    FY25

    All of Elanco's corporate accounts grew.

    Pet care subscription sales
    40%
    Current

    Of pet care dollars.

    Omnichannel consumers spending
    30% morevs single channel shoppers
    Annually
    Global animal protein consumption growth
    5%
    Annually

    Projected.

    US consumers increasing protein intake
    70%
    Current
    GLP-1 therapy users
    21%
    By 2035

    Projected to consume 40% to 50% more protein.

    Population over 60 expansion
    >25%
    By 2030
    Protein choices driven by taste
    2/3
    Current
    Animal health industry value add
    $20B
    Next decade

    Projected.

    Dairy industry growth
    4.2%
    Q4 FY25

    Industry growth.

    Industry KPIs

    7
    MetricValueDetails
    EPS revenue guidanceOrganic constant currency revenue growth of 4% to 6%; Adjusted EPS of $1 to $1.06% / USD
    Product franchise net sales$200MUSD
    Pipeline clinical milestones5 to 6
    Regulatory approvals filingsUSDA approval
    Therapeutic drug market share40%%
    Price volume mix decomposition2%%
    Geographic regional revenue growth9%%

    Deals & partnerships

    2
    AHV InternationalDutch-based farm animal health innovator focused on a portfolio of products for cattle that improves animal health and optimize efficiency while reducing the need for antibiotics.

    Accelerates Elanco's efforts to expand leadership in the dairy industry, particularly in North America and Europe, growing both share of voice and enhancing portfolio with solutions that support transition cow health.

    3 major new retailersShipping product to 3 major new retailers.

    Part of strategy to meet modern pet owners where, when and how they choose to engage.

    Risks & headwinds

    4
    Dynamic macro environmentFY26

    null

    Mitigation: Prudent, balanced approach in guidance; innovation and strategic pricing helps to insulate from broader macro pressures.

    Competitive pressures, including genericsFY26

    null

    Mitigation: Expect to gain incremental share by leveraging comprehensive portfolio and OTC retail leadership.

    Higher-than-normal inflationFY26

    null

    Mitigation: Elanco Ascend productivity program focused on general and administrative cost savings as well as manufacturing efficiencies.

    Higher cost of inventory flow-throughH1 FY26

    null

    Mitigation: Expected to flush through in the first half of the year, leading to margins enhancing and accelerating throughout 2026.

    What to watch in Q1 FY26

    5

    Zenrelia US label update

    Soon (implied next quarter for an update)
    CurrentSubmitted booster data, constructive dialogue with FDA.
    TargetPositive FDA response for label aligned with international markets.

    Why it matters

    A broader label would significantly expand Zenrelia's market potential and competitive positioning in the US dermatology market.

    We've not given a date, but we are confident with everything that I just mentioned that we believe with this data, it allows us to get a label that looks a lot more aligned with the other 40 countries, and we do look forward to an FDA response, and we'll update you when that happens.

    Q&A highlights

    7

    Asked about the reasons behind strong international Zenrelia share gains and what it means for potential US label changes.

    Jeff Simmons attributed international success to Zenrelia's efficacy, noting 40% share in Brazil and over 30% in Japan, outperforming new entrants in Europe. He highlighted 1 million dogs treated globally, 1.5 years of use, and 40 countries with clean labels, expressing optimism for a positive FDA response on the US label. Bob VanHimbergen clarified guidance assumes the label "as is."

    “Zenrelia is all about efficacy... Brazil is a very mature market compared to what people think, and we're 40% share.”

    asked by John Block · answered by Jeffrey Simmons

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q4 FY25 Performance and FY26 Outlook

    Elanco concluded FY25 with robust Q4 results, achieving 9% organic constant currency revenue growth, exceeding guidance across revenue, adjusted EBITDA, and adjusted EPS. This performance marks 10 consecutive quarters of underlying growth. The company introduced a FY26 outlook aligned with its long-term algorithm, projecting 4% to 6% organic constant currency revenue growth, $955 million to $985 million in adjusted EBITDA, and $1.00 to $1.06 in adjusted EPS, reflecting a balanced approach in a dynamic macro environment.

    02

    Innovation Engine Delivering

    Innovation revenue reached $892 million in FY25, surpassing expectations, and is projected to grow to $1.15 billion in FY26. The "Big 6" major innovation products, including Credelio Quattro and Zenrelia, are gaining significant traction globally, with Credelio Quattro becoming the fastest blockbuster in company history. The pipeline is refilled with 5 to 6 potential blockbuster approvals anticipated through 2031, demonstrating the R&D engine's productivity.

    03

    Strategic Deleveraging and Capital Allocation

    Elanco improved its net leverage ratio to 3.6x at year-end FY25, faster than planned, and expects to reach 3.1x to 3.3x by the end of FY26, with a long-term target of sub-3x by FY27. The company remains disciplined in capital allocation, prioritizing debt paydown while making strategic investments like the acquisition of AHV International, which is expected to contribute modestly in FY26 and more significantly in FY27 without impacting deleveraging targets.

    04

    Omnichannel Pet Health Strategy Driving Share Gains

    U.S. Pet Health achieved 10% growth in Q4 FY25 and gained market share in all major categories (prescription parasiticides, osteoarthritis pain, dermatology, vaccines) for the full year. The company's omnichannel approach, meeting modern pet owners where and how they engage, is driving industry-leading growth, with new products like Credelio Quattro boosting the broader Elanco portfolio and expanding clinic penetration.

    05

    Farm Animal Leadership and Growth

    The Farm Animal business delivered strong results, with U.S. Farm Animal up 17% in Q4 FY25, driven by Experior and Pradalex. The company is capitalizing on accelerating global animal protein consumption, projected to grow 5% annually in the U.S. alone, fueled by consumer focus on health and wellness and an aging population's need for protein. The AHV acquisition further strengthens Elanco's leadership in the dairy industry.

    06

    Elanco Ascend Productivity Program

    The company-wide productivity initiative, Elanco Ascend, is on track to generate $25 million in savings in FY26 through general and administrative cost savings and manufacturing efficiencies. This program is crucial for enabling adjusted EBITDA margin expansion while continuing strategic investments in product launches and R&D.

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