ELAN

Elanco’s results for the second quarter were positively received by the market, reflecting momentum across both its Pet Health and Farm Animal businesses. Management attributed growth to strong execution in the U.S. and international markets, particularly the success of new products like Zenrelia and Credelio Quattro. CEO Jeffrey Simmons noted that “Zenrelia was the largest contributor to second quarter total Elanco growth,” with broad-based gains from innovative treatments and share gains in core categories such as dermatology and parasiticides. Expanded retail availability and increased market penetration further supported volume and pricing strength. Is now the time to buy ELAN? Find out in our full research report (it’s free). Revenue: $1.37 billion vs analyst estimates of $1.31 billion (10.2% year-on-year growth, 4.2% beat) Adjusted EPS: $0.34 vs analyst estimates of $0.27 (26.5% beat) Adjusted EBITDA: $288 million vs analyst estimates of $250.2 million (21.1% margin, 15.1% beat) The company lifted its revenue guidance for the full year to $5.12 billion at the midpoint from $5.05 billion, a 1.3% increase Management raised its full-year Adjusted EPS guidance to $1.13 at the midpoint, a 6.6% increase EBITDA guidance for the full year is $1.02 billion at the midpoint, above analyst estimates of $1.00 billion Operating Margin: 8%, up from 6.8% in the same quarter last year Constant Currency Revenue rose 8% year on year, in line with the same quarter last year Market Capitalization: $11.36 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Glen Santangelo (Barclays) asked about pricing dynamics for Zenrelia and Quattro amid competitive pressures; CEO Jeffrey Simmons emphasized responsible pricing and durable demand, noting, “With portfolio value and differentiation, you can take price.” Jonathan Block (Stifel) asked for clarity on the revenue contribution of Zenrelia and Credelio Quattro; CFO Robert VanHimbergen highlighted broad-based growth but noted the innovation basket was the key driver on a stable base. Daniel Clark (Leerink) questioned the sustainability of Zenrelia’s first-line usage and messaging; Simmons pointed to growing veterinarian confidence and “best medicine” positioning driving increased penetration. Michael Ryskin (Bank of America) asked about the runway for Quattro and Zenrelia and the payoff from DTC investment; management cited ongoing clinic penetration and an “unbelievable” correlation between DTC marketing spend and market share gains. Umer Raffat (Evercore ISI) inquired about operating expense trends and leverage; VanHimbergen projected operating margin improvement as Project Ascend scales, with continued investment in launch support and marketing. In the quarters ahead, the StockStory team will be watching (1) the pace at which Befrena overcomes supply constraints and scales in the U.S. and international markets, (2) continued market share gains and clinic penetration for Zenrelia and Credelio Quattro, and (3) the impact of Elanco Ascend’s cost savings and automation on margin improvement. Progress on global launches and sustained farm animal segment momentum will also be important markers of ongoing execution. Elanco currently trades at $22.75, down from $25.60 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members). WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses. But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Wednesday, Aug. 5, 2026 at 8:00 a.m. ET President and Chief Executive Officer - Jeffrey Simmons Chief Financial Officer - Bob VanHimbergen Vice President of Investor Relations and ESG - Tiffany Kanaga Investor Relations - Beth Haney Operator: Good day, and thank you for standing by. Welcome to the Elanco Animal Health Reports Second Quarter 2026 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tiffany Kanaga, Vice President of Investor Relations and ESG. Please go ahead. Tiffany Kanaga: Good morning. Thank you for joining us for Elanco Animal Health's Second Quarter 2026 Earnings Call. I'm Tiffany Kanaga, Vice President of Investor Relations and ESG. Joining me on today's call are Jeff Simmons, our President and Chief Executive Officer; Bob VanHimbergen, our Chief Financial Officer; and Beth Haney from Investor Relations. The slides referenced during this call are available on the Investor Relations section of elanco.com. Today's discussion will include forward-looking statements. These statements are based on our current assumptions and expectations and are subject to risks and uncertainties that could cause actual results to differ materially from our forecast. For more information, see the risk factors discussed in today's earnings press release as well as in our latest Form 10-K and 10-Q filed with the SEC. We do not undertake any duty to update any forward-looking statement. Our remarks today will focus on our non-GAAP financial measures. Reconciliations of these non-GAAP measures are included in the appendix of today's slides and in the earnings press release. References to organic performance represents revenue growth, excluding the impacts from royalty revenue that was sold to a third party, foreign exchange rates and acquisitions and divestitures. After our prepared remarks, we will be happy to take your questions. I will now turn the call over to Jeff. Jeffrey Simmons: Thanks, Tiffany. Good morning, everyone. Elanco's second quarter results demonstrate our momentum and leadership in the attractive durable animal health industry. I'd like to thank the global Elanco team for their disciplined execution and once again delivering on our commitments. As highlighted on Slide 4, we achieved 8% organic constant currency revenue growth, outperforming the high end of guidance for revenue, adjusted EBITDA and adjusted EPS, allowing us to once again raise our guidance for the year. Growth was led by the U.S. Pet Health and U.S. Farm Animal, each up 11%, followed by International Pet Health up 9%, and we saw strong contributions from both price and volume. Elanco's diverse portfolio and omnichannel approach provide a strategic advantage with commercial execution across species and geographies. In the U.S. Pet Health, we continue to achieve share gains across all 4 major categories: derm, para, osteoarthritis pain and vaccines. Zenrelia, our newest blockbuster after reaching that milestone in July, was the largest contributor to second quarter total Elanco growth, closely followed by Credelio Quattro. In Farm Animal, the other half of Elanco revenues, we added to our leading position in the U.S. We grew nicely in international and saw global ruminants up 17% on a reported basis. Our big 6 led by Zenrelia and Quattro helped drive $340 million of second quarter revenue from innovation on top of a stable base. Our differentiated portfolio creates clear value, while our strong commercial success is also attracting top industry talent, allowing us to further enhance our sales team and distribution partnerships. With significant runway ahead for the Big 6, we are raising our full year innovation revenue target to $1.25 billion. Our robust top-line growth plus faster-than-expected margin expansion and working capital discipline have driven down our net leverage ratio more rapidly than planned. We are improving our year-end net leverage target to approximately 3x, down from a range of 3 to 3.2x previously. With our solid first half performance and business momentum, we are raising our top and bottom line full year outlook. We now expect organic constant currency growth of 6% to 7% adjusted EBITDA of $1.01 billion to $1.035 billion, representing 13% growth at the midpoint and adjusted EPS of $1.10 to $1.16, representing 20% growth at the midpoint. Our consistent delivery demonstrates our IPP strategy is working to expand our industry and at the same time, gain share across key markets and now also improve Elanco's profitability. While there has been much focus on U.S. vet visit volumes, we have consistently demonstrated that innovation and omnichannel leadership can drive strong growth in the U.S. Pet Health market. Stepping back, our positive results are clearly not aligned with secular declines in vet visits. This is about changing pet owner buying behaviors, not about vet visits. Very importantly, Elanco is bringing highly valued innovation into an industry-leading omnichannel capability, while there is more diversity in consumer spending that matches our broad access to the pet owner. For example, our data indicates that vet home delivery sales are growing nearly twice as fast as in-clinic sales. Combined across channels, we see a growing U.S. Pet Health industry up mid-single digits for the trailing 4 quarters through Q1 with resilient pet owner spend and rational pricing. In summary, Elanco is growing even faster through our comprehensive portfolio of differentiated innovative products and omnichannel execution. Simply said, the durable pet health market is growing and the pet owner is simply shifting behaviors like in most consumer markets. Looking more closely at the second quarter revenue performance on Slide 5, we break down the 8% underlying organic constant currency revenue growth. Our recently closed acquisition, AHV International contributed about 0.5 point of growth not included in the organic rate, building on our global ruminant success. U.S. Pet Health's 11% increase reflects a strong growth, both inside the vet clinic, online and at retail as well as in both prescription and OTC products. In the clinic, we achieved robust double-digit growth with our basket of innovation led by Zenrelia and Quattro, outperforming on top of a stable base. And the new launches also benefited the greater portfolio, including vaccines and pain. At retail, our OTC parasiticide portfolio performed well, building on our leadership position. Seresto and The Advantage Family both experienced good consumption growth in a mature market, reflecting strong trends for our products and supported by expanded in-store availability with Costco and Dollar General as new customers. Additionally, while building off a small base, Zenrelia and Quattro are growing rapidly in alternative channels. Moving to International Pet Health. We delivered 9% organic constant currency revenue growth driven by Zenrelia, AdTab and Credelio. While Zenrelia has reached blockbuster status globally, we expect it to attain this goal in both the U.S. and separately International Pet Health, where it is quickly capturing share in the $850 million international derm market. U.S. Farm Animal increased 11% in the quarter with continued growth across all species. Our cattle portfolio led the way as robust consumer demand for high-quality sustainable animal protein continues to outpace inflation at retail. International Farm Animal grew 2% in organic constant currency, reflecting previously mentioned timing of certain shipments in Q1 2026, primarily to the Middle East. Year-to-date growth of 7% shows the strong underlying fundamentals that demonstrate the global nature of the protein revolution, reinforcing the long-term value of the Farm Animal business. Turning to Slide 6. We delivered $340 million of innovation revenue in the second quarter. With growth across all of the Big 6, our broader basket of innovation outperformed expectations. As a result, we are raising our anticipated innovation contribution for 2026 by another $50 million to approximately $1.25 billion, reflecting many large products growing and gaining share in key growing global markets. Let's further discuss the progress of our major innovation products on Slide 7, starting with our newest blockbuster, Zenrelia. With over 2.5 million dogs now treated, Zenrelia's growth trajectory, both in the U.S. and internationally has accelerated further and continues to surpass our expectations with rapid share gains in the $2.2 billion and growing global dermatology market. Zenrelia's momentum is driven by its strong efficacy differentiation. June was Zenrelia's largest month yet despite new competition in the quarter with U.S. penetration climbing to approximately 18,000 vet clinics. That's greater than 60% of the total clinic base with a reorder rate maintained at over 80%. Our U.S. JAK market share improved 9 points year-on-year and also gained versus Q1, reflecting these new purchasers. Importantly, we are seeing increasing use of first-line treatment, now to over 40% of users, demonstrating growing belief that Zenrelia is the first choice for derm treatment for many veterinarians. Outside the U.S., Zenrelia is now in 47 countries, all without label restrictions. We continue to drive significant share gains across key geographies. For example, Zenrelia has built on its market-leading position in Brazil and gained #1 JAK status now in France. In Europe, we continue to outperform the competitive entrant with JAK market share as high as 40% plus. As we've previously shared, Zenrelia performed well in a head-to-head study against the market incumbent. This strong performance is also clear in a new study commissioned by the competitive entrant that compares the efficacy of available JAK inhibitors in a laboratory model. The results reflect our real-world experience that Zenrelia's efficacy is a game changer. On to our second derm innovation, Befrena, which soft launched in May ahead of the allergy season. Commercial product has shipped to approximately 1,400 U.S. clinics with strong early feedback. We are ramping capacity to meet higher customer demand that is double the size of our expectations with weekly increases in supply. Given the robust demand, we anticipate supply reaching unconstrained levels in early 2027. A phased launch is typical for monoclonal antibodies or mAb products as we scale our bioreactors with the anticipated manufacturing ramp-up. Overall, we're pleased with Befrena’s very early momentum and ability to increase our competitiveness, especially with corporates. Next, on Credelio Quattro. We are excited by further acceleration of dollar share gains and broad-spectrum dispensing sales from U.S. clinics. Quattro's market share increased 4 points in Q2 on top of the 3 points in Q1. We rapidly expanded the number of clinics that carry Quattro to over half of the U.S. base today, up 10 points since Q1. That's an increase of approximately 3,000 clinics. We achieved this significant penetration as a direct result of our strategic brand investments year-to-date, helping veterinarians and pet owners gain appreciation for the 4 dimensions of differentiation that make Quattro what we believe is best medicine. The speed of tick kill is proving especially relevant to pet owners today. As the Wall Street Journal and others have recently reported, black-legged tick populations are expanding and Lyme disease cases are rising as a result. Quattro is resonating with pet owners who want robust protection for their pets and themselves with our newly published data, again, showing faster speed of black-legged tick kill than the leading competitors. This combines with Quattro's first FDA conditional approval for the treatment of New World Screwworm in dogs, all to represent powerful examples of life-cycle management to build on our differentiation. Like Zenrelia, Quattro's momentum accelerated during the quarter with June also as the product's largest month ever. We're seeing strong pet owner demand activated by DTC activities where we continue to make high return on investments. Our targeted media approach and industry-leading position with reps and distributors differentiate Elanco and drive our share of voice in the pet health marketplace. Together, we're taking this differentiated product to new heights with runway for significant share gains ahead. We continue to track Kynetec Puppy Index as an important leading indicator where Quattro ranks highest versus other broad-spectrum endectos. Globally, we are confident Quattro can lead the Credelio family to become our largest product family ever. So far this year, Quattro is launched in Australia, Canada and Japan. The EU and the U.K. are next in the nearly $800 million international broad-spectrum market, which is growing double digits. Finally, our international OTC parasiticide AdTab has continued its rapid climb toward blockbuster status with sales up more than 30%. AdTab is the fastest-growing brand in the nearly $600 million OTC ecto category in Europe with success also supported by data-driven, high-return DTC investments. Moving to Farm Animal. Experior grew double digits in the quarter. This growth plus the benefit to our cattle portfolio have helped power another quarter of double-digit U.S. Farm Animal results. We expect Experior to continue to grow and provide portfolio synergies with multiple levers from extending days of use, continued adoption and price. However, we anticipate moderating growth rates against challenging comparisons. Lastly, on Bovaer, our expectations and trajectory are consistent with our last update as we continue to see demand from CPG companies that supports sustained interest and consistent [ cow ] numbers. Bovaer achieved good year-over-year growth in the quarter, albeit off a small base, and we're investing in long-term initiatives for this potential blockbuster to enhance the product value and demonstrate user flexibility. For the balance of 2026, we continue to expect growth at a measured pace. Moving now to Slide 8. We provide recent highlights across the 3 parts of our consistent IPP strategy, innovation, portfolio and productivity. Starting with innovation. We've had meaningful progress since our December Investor Day with the Next Wave portfolio growing and progressing without attrition. We now have even higher confidence behind the 5 to 6 blockbuster potential innovations expected through 2031. Ellen and the R&D team have increased the number and value of projects in development and the overall probability. This is driven by a few specific things that are working very well. We built a project-centered organization and established a one-of-a-kind innovation execution capability that leverages the potential of AI and has an optimized global footprint combined with strategic partnerships in clinical and technical development and most of all, a stable, engaged, highly capable and experienced team of scientists who are laser-focused on progressing the Next Wave portfolio and refilling the pipeline. We are working hard to ensure a consistent flow of blockbuster potential innovations through the end of this decade and well into the next. Today, our basket of innovation is driving our broad-based growth. This can be seen in global ruminants, our fastest-growing species as innovation fortified our beef and dairy portfolio, up 12% in the quarter on an organic constant currency basis or 17%, including AHV and FX. Our Pet Health launches are powering growth with U.S. corporate account sales, adding 300 new corporate clinics with year-to-date sales ahead of total U.S. Pet Health. Innovation is also driving pricing gains, up 2% in Q2 for total Elanco. We are on track for full year acceleration from 2025, including a back-half-step-up from customer mix. Finally, we continue to pay down debt faster than planned and strengthen our balance sheet. At 3.1x net leverage in Q2, we are now approaching the under 3x landmark, enabling greater capital allocation flexibility. This opportunity is enabled by productivity gains with gross margin expansion in the second quarter, up 80 basis points and Elanco Ascend on track to drive meaningful efficiencies and margin improvement in 2026 and beyond. I firmly believe we are just the start of the next era of value creation for Elanco as our consistent execution, along with growth, innovation and cash will add to our momentum and leadership in Animal Health. With that, I'll pass it to Bob to provide more on the second quarter results and financial guidance. Robert VanHimbergen: Thank you, Jeff, and good morning, everyone. My comments today will focus on our adjusted results for the second quarter. Please refer to today's earnings press release for the details of our reported year-over-year results. Starting on Slide 10. We delivered $1.368 billion in revenue, up 10% on a reported basis. Organic constant currency revenue grew 8%, driven by a 6% increase in volume and a 2% contribution from price. Slide 11 provides revenue from the 4 quadrants of our business. Total Pet Health revenue grew 11% in organic constant currency. Our U.S. business increased 11% with strong momentum in both vet and retail channels. Performance was led by strong demand for innovation, specifically Zenrelia and Credelio Quattro. In Retail OTC, Seresto led top-line growth in the quarter. Internationally, Pet Health revenue increased 9% in constant currency, led by the continued momentum of Zenrelia and AdTab. Our Farm Animal business delivered 5% growth in organic constant currency. In the U.S., organic revenue increased 11%, reflecting broad strength across all 3 species. Beef cattle led the quarter, supported by Experior. Our International Farm business grew 2% in organic constant currency with both ruminants and poultry contributing. As a reminder, results were impacted by accelerated shipments to the Middle East earlier this year. So it's important to view the quadrant growth on a year-to-date basis, which is up 7%. Moving to Slide 12. Adjusted gross margin reached 58.1% this quarter, an 80 basis point improvement versus the same period last year. The outperformance was driven by a favorable product mix benefit and Elanco Ascend acceleration that more than offset the anticipated inventory cost pressures. Looking ahead to the second half, we are well positioned for continued margin expansion, supported by the sustained momentum of our U.S. Pet Health business and early contributions from Elanco Ascend. Operating expenses were up 10% in constant currency over the same period last year, reflecting our commitment to strategic growth. This increase was driven by targeted DTC support for our new product launches and ongoing R&D initiatives. We view these as high-return investments that align directly with our strategic vision that are expected to drive long-term value. Interest expense for the quarter totaled $44 million, consistent with our expectations. On Slide 13, we show an adjusted EBITDA year-over-year comparison for the quarter. Adjusted EBITDA was $288 million, an increase of $50 million or 21%. Adjusted EPS was $0.34, a 31% increase year-over-year. Slide 14 highlights our ongoing commitment to balance sheet discipline. Our strong operational performance and a decrease of approximately $90 million of net debt have resulted in a 0.5 turn reduction in leverage since the start of the year. We are closing in on our target of sub 3x next year. This is a key milestone that will unlock greater capital allocation flexibility as we pursue our long-term target of 2 to 2.5x. Moving on to financial guidance, starting on Slide 16. Our strong second quarter performance allows us to both raise our full year outlook and continue to invest in our innovation products, driving market share gains while expanding the total industry. We are increasing the midpoint of our organic constant currency revenue growth expectation with the range now at 6% to 7%, up from 5% to 7%. We expect revenue dollars of $5.09 billion to $5.14 billion, which includes a $60 million year-over-year tailwind from favorable foreign exchange rates, most of which was realized in the first half. Additionally, our recent acquisition of AHV International is expected to contribute approximately 1 percentage point to total reported growth for full year 2026. Guidance for adjusted EBITDA increases approximately $32 million to 13% growth at the midpoint, capturing our quarterly beat and approximately $6 million of incremental investment in our innovative launches. For adjusted EPS, we are raising our guidance by $0.07 at the midpoint, bringing the new range to $1.10 to $1.16, up 20% at the midpoint. Finally, we updated year-end cash and balance sheet expectations and now anticipate a net leverage ratio of approximately 3x by year-end. Turning to Slide 18. You will see the primary drivers within our guidance ranges are unchanged from our previous update. Our guidance reflects a balanced view of the competitive external environment and growth opportunities within our portfolio and Elanco Ascend, our multiyear productivity and cost savings agenda. Now let's discuss Elanco Ascend. Since launching at the start of the year, we have outpaced our initial milestones as we work towards delivering $200 million to $250 million in total adjusted EBITDA savings by 2030, net of inflation and program reinvestment. We built Elanco Ascend on 4 strategic pillars: procurement, price, organizational optimization and automation. Last quarter, I shared an update on our AI-driven automation progress. Today, I will highlight procurement. Our team is doing exceptional work identifying global suppliers that deliver high-quality materials at a significantly lower cost. A recent win includes securing an additional API source for a Big 6 innovation, which directly improves our margins and strengthens our supply chain resilience. I'm excited by how the organization is truly leaning in and engagement is translating to results. The global Elanco team is executing on an expanding pipeline of Ascend opportunities, which gives me a high degree of confidence in our ability to deliver long-term gross margin improvement and stronger cash flows on a lower cost base. When you pair that agenda with our growing portfolio of high-margin innovations, we believe the path to a longer-term 60% gross margin is clear. Moving to our third quarter guidance presented on Slide 19. On a reported basis, we expect $1.195 billion to $1.22 billion in revenue, representing organic constant currency revenue growth of 5% to 7%. The year-over-year increase in operating expenses, primarily related to launch investments is expected to be approximately 11% in constant currency. As a result, we anticipate adjusted EBITDA of $200 million to $250 million (sic) [ $215 million ] and adjusted EPS of $0.19 to $0.22. Finally, on Slide 20, we highlight the acceleration in U.S. Pet Health growth with expectations for continued robust gains in the second half of the year. We are confident in driving high single-digit to low double-digit growth despite challenging comparisons, driven by strong momentum for Zenrelia and Credelio Quattro, contributions from Befrena and significant corporate account growth. For the full year, we expect the U.S. Pet Health business to achieve at least high single-digit revenue growth, once again leading the industry. Now I'll hand it back to Jeff for closing comments. Jeffrey Simmons: Thanks, Bob. Elanco is clearly winning through our differentiated innovation, our comprehensive portfolio and our diverse go-to-market model, along with our commercial execution. Our strong year-to-date results underscore Elanco's long-term opportunity. As I close on Slide 21, let me address the 3 broader U.S. pet health industry questions that we have heard. Have prices, the consumer and the market remain durable? The answer all around is yes, with many proof points highlighted on this slide. The U.S. pet health industry grew 5% in 2025, led by derm and the broad-spectrum parasiticides. After a weather-related speed bump in early 2026, we've seen a strong market rebound starting in March, also evident in Elanco's results. Across a holistic omnichannel view, the industry is well positioned for continued growth in 2026. Vet channel revenue is up low single digits year-to-date. We see solid consumption trends at retail with OTC flea and tick category up more than 4% year-to-date and alternative channel prescriptions growing very rapidly. Additionally, there's generally stable pet ownership. Demand for pet health has always been broader than a singular metric like vet visits and even more so today. Pet owner spend remains resilient as the expectation of care has never been greater with pets at the center of the family. A number of recent studies, including our own conducted at the end of May, showed that pet health and wellness remain an absolute priority for pet owners as a protected budget item. 95% of surveyed owners said they would not cut spending on pet health and 90% expect to maintain or increase spending over the next year. Consumer spend is clearly changing, favoring highly accessible and convenient purchasing channels. Finally, on pricing. This is a market that responds to value and differentiation, and that's where we're leaning in. In fact, at the start of 2026, our innovation allowed us to implement our largest price increase in the U.S. market in 5 years. Price accelerated in Q2 in our U.S. Pet Health business, and we expect continued acceleration in the back half of the year. Stepping back, it's also important to keep a global perspective. The U.S. pet health market is just 1/3 of the global animal health industry with farm animal driving 10% growth in 2025. Moving to Slide 22. We expect total animal health to expand from $40 billion to $60 billion in annual revenue into the next decade, driven by a fundamental increase in global protein consumption, international humanization of pets and pet owners seeking increased care, convenience and value. In my many years in animal health, I've seen this industry show reliable growth even in times of economic challenge. Animal Health provides consistent long-term growth because we're at the center of society's most important needs with pets and protein. Turning to Elanco specifically on Slide 23. Our charge is clear: keep innovating, keep delivering, keep making life better for animals. Elanco has 4 key drivers of value creation through the rest of the decade, providing a compelling investment opportunity. First, growth. We have consistent growth across businesses and geography. The Big 6 offer significant runway ahead, expected to double in size over the next 3 years. Importantly, our growth is not dependent on a single product or 2. Meaningful differentiation is driving share gains in large growing markets with globalization largely just beginning. Second, innovation. We have increased confidence in our robust pipeline that is progressing without attrition since our December Investor Day, on track to provide 5 to 6 blockbuster potential innovations by 2031. Our R&D engine is stronger than ever with a highly engaged team and stable leadership and a collaborative project-centered matrix structure. We know we cannot have an air pocket in our pipeline. We have built a robust organization that is moving faster and more efficiently than I've seen in my career to deliver a consistent flow of high-impact innovation. We're excited to share updates with you in the quarters and years ahead. Third, we have an accelerating cash and margin profile. We've increased our full year adjusted EBITDA margin guidance to approximately 75 basis points year-over-year improvement, including 50 basis points of gross margin benefit. This expansion is happening while we're also driving strategic DTC investments to accelerate market share gains. And we're just getting started. Elanco Ascend is gaining traction faster than anticipated, driving strong early results and becoming embedded in our culture. Improved productivity is accelerating our free cash flow to fuel our rapid continued reduction of our net leverage ratio and increased capital allocation flexibility. Finally, Elanco's profile is purposely balanced to align with an evolving growing industry. We have diverse exposure split between Farm Animal and Pet Health and U.S. and International. We have a pet health leadership in retail and vet clinic innovation. Elanco is strategically built for the next decade of animal health value creation with strong alignment to the fundamental drivers across pets and protein. I believe no other animal health company is so well positioned to consistently execute to transform and grow the industry and create long-term value for our customers, communities and you, our shareholders. With that, I'll turn it over to Tiffany to moderate the Q&A. Tiffany Kanaga: Thanks, Jeff. We'd like to take questions from as many callers as possible, so we ask that you limit yourself to one question and one follow-up. Operator, please provide the instructions for the Q&A session, and then we'll take the first caller. Operator: [Operator Instructions] Our first question comes from Glen Santangelo with Barclays. Glen Santangelo: Jeff, I just want to start out talking about your prepared remarks. You specifically called out Zenrelia and Quattro as being the biggest contributors to growth. And my question is really on the pricing environment around those drugs. You've commented or the company has commented several times about price increases across the portfolio being greater in 2026 versus the past couple of years. But given the concerns we hear from investors around the competitive landscape and pricing generally, can you comment on what you're seeing specifically with respect to pricing in Para and derm? And then maybe I'll just ask my follow-up. This is for Bob. I'm trying to reconcile the EBITDA margins comparing what we saw in the first half of the year versus your expectations for the back half. Considering the strength that you have in the innovation portfolio, it seems like this improved mix and pricing should continue to be a tailwind for you in the back half. You have obviously more conservative expectations. Maybe there's some seasonality and some other investments in there that I'm not thinking about. And I'll stop there. Jeffrey Simmons: Thanks, Glen, for the question. I will point to Slide 21 just on the 3 common themes we've heard and why we wanted to really put up some key data points. But we continue to see industry growth, a resilient pet owner and durable price. And let me double down on price and your question. Look, we see a marketplace that's remained responsible on pricing. Again, with portfolio value and differentiation, you can take price. That's why the industry has seen 2% plus over 30 years. We're seeing no change. If anything, in Q2, 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. I would say specifically in derm, and the broad-spectrum parasiticides, we're seeing strong double-digit outside the U.S. growth in the U.S. continues to grow. Derm and broad spectrum have lessened, but it's still low single to mid-single-digit growth that we've seen here in Q2. So overall, we're seeing price acceleration in our U.S. Pet Health from Q1 to Q2. It will continue to accelerate in the second half. Where I see competition is there's different plays relative to spend to get share. Spend is going up to get share. And we actually -- our share of voice and our competitiveness has increased. We've added competitive reps, multimedia and more importantly, distribution kind of on our side, where we've seen some competition actually play margin and decrease and restructure and cut reps. So I think our competitive position is stronger, price remains responsible and the markets are very durable. Robert VanHimbergen: Yes. Maybe I would just add a couple of points to that. And then, Glen, I'll get to your second question. But pricing in the quarter, again, was just right in line with our expectations. We saw a great balance of pricing between Pet Health at 2% as well as Farm. And I'd highlight pricing from quarter-to-quarter can be and is influenced by both customer and product mix, but we've got a high degree of confidence in the second half seeing that acceleration on pricing. So then on your second question, Glen, on margins. And maybe I'll just give you color across both gross margins and EBITDA margins. But starting with gross margins, we are estimating gross margin expansion of 50 basis points year-over-year. That's up a bit from the 40 that we had previously guided. And it is driven from the second half with productivity. Procurement is doing a fantastic job with the supply base and then volumes. This is partially offset by the first half, which we saw muted growth from inflationary pressures and the high cost of inventory flowing through. And so that is flushed out. But the U.S. Pet business had a fantastic second quarter, and we expect that to continue here in the second half. As I mentioned and Jeff has mentioned, we do see pricing accelerating in the second half as well. And then finally, our basket of innovation continues to grow. And as that brings higher margins than the corporate average, we'll see that benefit. Now I want to highlight a couple of things. One, we are still seeing inflation above historical levels. And then number two, as we think about EBITDA margins, we are going to continue to invest in DTC to drive market share gains. I can tell you there is a very high correlation with data-driven decisions that we see, but a high correlation between the DTC spend and the market shares that we've picked up here in Q1 and Q2, particularly in Credelio Quattro. We spent a lot of time with Bobby Modi and his marketing team on investments and the results. And again, you've seen it in Q1, Q2. And we're going to continue to invest in these product launches, and you see that step up here in Q3, Q4. But you highlighted this as well, and this is absolutely true. There is a phasing to the business. Our business is more first half weighted versus second half. So there is some seasonality in there. But listen, I want to leave you with this. Longer term, we are very confident in our ability to improve gross margins and EBITDA margins as we continue to see a favorable mix and the benefits from Elanco Ascend coming in. Operator: Our next question comes from Jon Block with Stifel. Jonathan Block: So Jeff or Bob, the 8% organic constant currency is roughly $100 million of dollar growth, if I've got that correct, year-over-year. You called out Zenrelia and CQ as the 2 biggest drivers of that $100 million. Can you just provide some sort of a framework? In other words, are those 2 about half of that $100 million on a year-over-year basis in terms of growth, more than half, less than half? I think, obviously, key products for you that continue to do really well. We're just trying to get a better sense for the level of contribution. Robert VanHimbergen: Yes. So Jon, so listen, as I think about -- I probably won't give you numbers, and we think about this as the basket of innovation growing well. But listen, we saw growth across the entire portfolio, right? So we did see our basket innovation go $340 million. That's on a stable base, again, stable base. We view as up or down low single digits. And in the first half, we saw strength in Q1 and actually growth in Q1. Q2 was a little bit more balanced, down 1%, but year-to-date, we're still up on our core business. But listen, we saw quality growth across the entire portfolio. In the U.S., again, up 11%. And yes, Zenrelia and Quattro were the leaders. Outside the U.S., we continue to see strong performance from Zenrelia. AdTab grew over 30% internationally and then the Credelio family performed well. And then on the Farm side, listen, in the U.S., we grew 11% growth across all species. I'd say solid growth from Experior and Rumensin. And then outside the U.S., 2% growth. But as I highlighted in my prepared remarks, we did have some timing between Q2 and Q1. So it's important to look at that as a year-to-date number, which grew 7%. Jonathan Block: Okay. Got it. That was good color. And then I'll pivot for the second question. Jeff, it was good to hear the demand trends, the early demand trends for Befrena. Maybe you can tell us where those successes are coming from. Are those, call it, Zenrelia accounts that are giving you a little bit of a running start into atopic derm? Is it traction with the corporates? And how do we think about the worldwide opportunity for Befrena that can start to take hold next year in 27? Jeffrey Simmons: Yes. Thanks, Jon. Look, I'll just back up and say derm, we're excited. When I look at Befrena coming in and joining Zenrelia and then look at Ellen's pipeline, we've highlighted during the Investor Day, we see ourselves continuing to grow and become more of a leader in derm for the rest of the decade. So -- and derm continues to grow nicely, double digit outside the U.S., as you know. And the Zenrelia success is definitely going to pull Befrena. So look, we did the survey, Jon, and it showed 83% of veterinarians in the U.S. wanted to use Befrena. Very clearly, we're seeing that come through. Bobby's expectations of demand from Q1 to Q2, it's more than doubled on Befrena. So we're being very careful. We're using a gating demand system because once you start a dog on Befrena, you're going to want to keep them on. So we're gating that demand. Supply is stepping up every week. And you know the monoclonal phasing as we move the bioreactors up in size, all of that's going to help margins. It's going to help quantity. And so that demand is going to become, we think, more unconstrained and fully into the marketplace as we go into 2027 on the early side. So -- and yes, the Zenrelia has opened the door. Look at that first-line treatment at 40% in more than half the clinics without question, that is where we're seeing Befrena come in. Befrena will be a key unlock, we think, for a lot more corporates. But at this point in time, we've not leaned in as much with corporates yet because that unlocks a lot more demand, and that will be part of the gating system. So look for this to be a nice key driver for '27 growth as we go in. And then I just think, think Elanco global derm, multiple products, derm leadership by the end of the decade is our focus. Operator: Our next question comes from Daniel Clark with Leerink. Daniel Christopher Clark: I wanted to ask about the 40% first-line usage in Zenrelia in about half the clinics that you've highlighted. I mean how, I guess, how high do you kind of think that can go given the trajectory that you've seen? And what are the -- what's the messaging that you're really leaning on to drive first-line usage? Jeffrey Simmons: Yes. Thank you very much for the question. Yes, I think it's probably one of the bigger proof points of the quarter for Zenrelia. Zenrelia, our #1 contributor for growth for the entire company. The expectations of this product continue to grow. Manufacturing stays at 24/7, 47 countries internationally that's really driving growth. I just think that the veterinary community come out of the AVMA convention here this past month. And you just look, I mean, they're very connected globally. So when they see 47 countries, they see the 2.5 million dogs. I think the first-line treatment up to 40% demonstrates there is a vet confidence in this product. There's a desire to satisfy that pet owner right away, and they believe that Zenrelia is that option. And we believe, from our perspective, this is best medicine right now in a market that wants a pet owner to be satisfied when they come in with a itching dog. So we continue to see that climb. We continue to see Zenrelia's leadership grow. And as we just addressed with Jon, Befrena will help Zenrelia, Zenrelia will help Befrena. So -- and again, I think the international growth is really in the early innings as well. So that's where we stand, a very, very strong quarter with Zenrelia. Daniel Christopher Clark: Great. And then just a quick follow-up. Any update on the time line with the additional study and sort of what you're doing with the FDA on the label front? Jeffrey Simmons: Yes. No new study is progressing as planned, nothing new to report. Again, it's a time research is in process, and we anticipate submitting the data as planned to the FDA by no later than the end of the year. Operator: And our next question comes from Michael Ryskin with Bank of America. Michael Ryskin: Congrats on the quarter and strong results. I'll stick with Zenrelia and Quattro specifically. You really continue to talk up share gains, share gains, share gains in terms of clinic penetration, in terms of market share, both for Zenrelia year-over-year, quarter-over-quarter, it looks like Quattro accelerated. I kind of want to get into how much runway there is there? I mean I think you're still obviously very, very early in both launches. You're still breaking into what effectively has been a monopoly in both markets. A lot of this is going to be clinics placing initial orders sort of setting you up as that alternative or is that other vendor out there. But when you think about peak market share opportunity, anything you could say in terms of how much momentum you think you still have, how much runway you still have? It feels pretty safe through the rest of '26, but we love to talk about '27, '28 and just sort of the runway you see there. Jeffrey Simmons: Yes. Thank you, Michael. There's no question, as I highlighted, the next big era unlock for Elanco value first is the long runway we see for all Big 6 blockbusters coming. But specifically to Quattro and Zenrelia, I'll start with Quattro. I mean, Bobby said in the Investor Day, more clinics, more share and new puppy starts. And all 3 of those metrics are green and they're moving forward. To pick up close to 3,000 clinics pretty much in a quarter thereabouts, that is a significant ramp. And now we doubled down on the penetration within that clinic. I'm going to point to one thing just on Quattro. And again, Ellen and the team, just life cycle management, you've probably seen. I mean, the tick awareness and the linkage to Lyme disease, a recent Wall Street Journal article, many media reports, even the New World Screwworm and the worry of any tick bite with dogs this black-legged tick, we have set out our second new research study on this showing competitive advantage on speed to kill. That's an example of a catalyst to drive Quattro to come into a clinic and become first line, first choice. So I think that differentiation is getting solidified. It's getting widened, and we see best medicine. So -- and then as you look at, it's really just getting started internationally. Romero is out traveling right now in Australia and Japan, where we're launching and Europe and U.K. is up next. As you know, that's a big $850 million market. And I would say the same with Zenrelia. The news is coming. It's outstanding. And look, new research, I point a competitive study, the second head-to-head is out there with all 3 JAKs. And all I would say is when you look at that study, any KOL or vet that sees it around the world is seeing, hey, Zenrelia efficacy is demonstrated in research and it's demonstrated in the 47 countries. I'm really proud of the French team becoming #1 right now in the Q1 with Zenrelia. So long runway, Jon (sic) [ Michael ], I see ahead. And both markets are growing -- the 2 markets are growing double digit outside the U.S. Michael Ryskin: Okay. Okay. And then related to that, if I could, on the incremental investments you talked about in the second half, I think you touched on it in an earlier answer in terms of you're seeing really good payoff with DTC. And so you're going to take some of the outsized earnings you're seeing, some of the top line benefit you're seeing and reinvest it back to support these growth drivers. I kind of see those 2 moving up in lockstep, right, as the products get bigger and as the ramp continues, you're going to invest more to support more growth. Where do you see the biggest payoff in DTC spend? How much runway is there on that front, right, on the investment side? How long until you sort of hit a steady state in terms of the dollar amounts you need to invest to support these? Or do you just see kind of growing throughout the rest of this year, next year and beyond? So like what's the right level until you've kind of hit saturation on that? Robert VanHimbergen: Yes. So it's a great question, Michael. And listen, like I asked that as well. And again, like I'll reiterate the time I spend with Bobby and his team and looking at data, and I can't emphasize enough the direct correlation we can see with the OpEx spend in DTC and the market share gains. It's just unbelievable data and data that both Bobby and I would say we've never seen this correlation before in our careers. So we're going to continue to use data to make the decisions, and it's hard to put a time frame on that, but really pleased with the 3 points of Quattro growth we saw in market share growth we saw in Q1 and the 4 points in Q2. And so listen, like we're just going to keep going there and grow that top line with market share gains. And when we get to a point we don't see the return, that's where we'll scale it back. Operator: Our next question comes from Umer Raffat with Evercore ISI. Umer Raffat: Congrats on all the execution on top-line growth. On all the execution on top line growth. I wanted to focus on OpEx for a quick second. So top line is up 8% organically in 2Q and OpEx is up 10%. So I guess my question to you is not even so much on operating leverage. It's really what are your plans on OpEx going forward in general? I realize we should continue to expect top line growth, but how much operating leverage should we truly be expecting? And on an absolute basis, is the OpEx build-out complete? Or is it going to continue to go up mid- to high single digits over the next couple of years year-over-year as well? Robert VanHimbergen: Yes. So great question. And listen, I think a lot of the OpEx is particularly tied to the DTC Umer. And so listen, like we're going to keep that OpEx investment. But certainly, we do see leverage continue to improve, I'd say, as we move out through 2027.Listen, one of the major contributors to '27 margin growth and beyond and you think about the algorithm that we gave at Investor Day, but it's Project Ascend, all right? And so what Project Ascend is going to do is not only fund a lot of the OpEx, but it's also going to drop to the bottom line. And listen, like I think we're at a new level with Ascend here recently. Really pleased, as I mentioned in my prepared remarks, with the acceleration of projects across the OpEx as well as what's happening in the 4 walls. We have a highly engaged team and a great cadence of reporting and meetings. But listen, the granularity is at a new level. And so what I expect to see moving forward is continued improvement in operating margins and really funding some of that OpEx. But I think you'll start seeing leverage here improve here in 2027 and beyond. Operator: Our next question comes from Brandon Vazquez with William Blair. Brandon Vazquez: And congrats on a nice quarter here. One, I think, Jeff, you had briefly mentioned this, but maybe something that I get a lot of questions from investors on that might be helpful to go over is just what's the response from competitors in the market? You guys are clearly doing well. You have a good innovation cycle here. What are they doing to try to take share? Maybe you could just talk about that a little bit. Jeffrey Simmons: Yes. I think overall, a durable market that I said after the January, February weather bump, we've seen a rebound in the market. So I think the markets are robust. You're seeing that in the results the pet and protein trends. I mean I'd point to our ruminants up 17%. I mean, the cattle, the dairy business. So I think the overall global market, remember, U.S. pet health is about 1/3 of the market. The other 2/3 really start to look at international pet and protein as big drivers as we go from this $40 billion industry to $60 billion. I think that's important. But yes, when you get into some of the competitive spaces, there's a combination of things. One is it's selling the portfolio. I think that's important. It's really direct -- this direct marketing is getting more sophisticated. It's less TV advertising and a lot more direct to specific niches and using today's technology that I think is working. And that's where I see the most is a lot of competitive spend to target in niche markets. We like where we are with our reps. We've got one of the largest teams in the industry with the best relationship, a real call out to our distribution partners and what they've done. So -- it's competitive, but it's durable, and I don't think there's -- and it's been very responsible in the marketplace. We sell our portfolios in this industry, and that's what we're doing. Brandon Vazquez: Okay. Great. And Jeff, I don't ask you enough on farm animals, but let me ask on Farm side. Experior continues to do well, still up double digits, but you're getting more penetrated into the TAM that you guys have outlined between Experior and Bovaer, maybe just level set us where are you on kind of TAM penetration there? What should we think about for any potential catalysts or the -- what we should expect growth rates in that -- those 2 products to be? Jeffrey Simmons: Yes. They're going to continue to be growth drivers second half as well as into next year. No question, the ruminant market, both beef and dairy, got a beef shortage globally, and that's going to be there for a while. And when there's this high demand for all protein groups, a healthy animal is a productive animal. Our value proposition in farm animal continues to climb when the economics are strong, that makes more affordable protein for the consumer. So all those trends are positive for us. I'd point to probably ruminants and poultry, as we said in our Investor Day, is where we're going to lean in heavily. Bovaer and Experior going to -- Experior is going to have tougher compares, but still going to be a nice growth driver as it globalizes and we get more days on use here in the U.S. And Bovaer, small base, but will continue to climb. We love the farmer value and the farmer retention on Bovaer in the U.S. dairy industry, and that will climb as well and be growth drivers in 2027. Operator: Our next question comes from David Westenberg with Piper Sandler. David Westenberg: I'm actually going to continue with that farm animal question. Just can you talk about how long herd expansion does support growth? I mean, how much of this would be, in fact, a multiyear driver? And then you kind of mentioned on the call, innovation, not desire for no air pockets and that innovation through 2031. Can you talk about how much of that could be in farm animal? You also kind of mentioned you're in the later launch cycles with Experior and Bovaer -- well, maybe not Bovaer, but 2, 3 years into it. So it would be great to hear how you could be growing in that '28, '29 time frame. And if I can ask just one more sweeping into capital deployment. Now that you are approximately 3x or heading there, does this change your capital deployment strategy? Jeffrey Simmons: Thanks, David. Yes. Look, I think just speaking specifically of the beef industry, yes, there -- we saw a tick up about 1% year-on-year in replacement cattle. So a rebuild, but much slower. The drought has definitely been a headwind. But look, I see overall beef demand right now is great globally. So the beneficiaries are Argentina and Brazil and other smaller markets, Canada, others. And I would just say this is going to be a really nice runway. At the same time, dairy and poultry specifically in places pork are taking advantage of it. There's a lot of innovation right now in dairy as an example, and we're seeing that. Our AHV acquisition has been integrated nicely. So I see a real positive moving forward. Look, we see the industry 60% farm animal. This protein thing is going to be, I think, a positive bump for our industry. Elanco's leaders in the U.S. and other places. We're going to lean in pretty heavily. Ellen already has. She's got dedicated focus with these project teams that I mentioned. And our farm animal pipeline look for us, productivity, sustainability, disease treatment, food safety, vaccines, feed additives and other modalities are all moving very nicely. Ellen's farm animal innovation team is as robust as probably we've ever seen it in our history. Robert VanHimbergen: Yes. And then on the capital allocation question, David, listen, no change to the strategy that we've outlined in the past. Debt paydown is still the #1 use of free cash flow right now. We'll continue to invest strategically in the business, supporting R&D, manufacturing as well as commercial launches. M&A is going to be a part of our midterm and long-term strategy, but think of these as smaller tuck-under opportunities. But as we get below that 3, as we've said before, that will unlock capital allocation flexibility. And right now, we're hyper focused on getting there. Operator: And our next question comes from Chris Schott with JPMorgan. Christopher Schott: So first one is just on AdTab. It seems like another good quarter for the product. Just elaborate a bit more on the trends that you're seeing, what's driving the strong uptake and how big you think that product can get over time? And second question is just on parasiticides and Credelio Quattro. Can you talk about the growth you're seeing for the broad-spectrum parasiticide category? I don't know if you have this data, but what percent of dogs are currently on a broad-spectrum product and where do you see that going over the next several years? Jeffrey Simmons: Yes. Thank you for the questions. On AdTab, you've got a $600 million-plus market in Europe that is products that can be even scripted here in the U.S. that are retail there. And look, I think we said this is well on a path to be a blockbuster. It's #1 in the marketplace. It's grown double digits now for quite a few years in a row, a real credit to the European team and how they're launching the product, 30% growth this past quarter. Look, I think I'd point to AdTab as we put Advantage into the marketplace in 3 or 4 new SKUs globally, The Advantage brand loyalty is strong. Our launch capabilities are strong. We see a really nice runway for this product. We'll have some tougher compares going forward, but look for this to become a blockbuster and continue to be a leading product in that $600 million market that continues to grow nicely. And I think it does demonstrate that pet owner that wants to shop in multiple places. AdTab is an example of that. And look, back to the broad spectrum, I'd point to, it's a $1.5 billion market. It's continuing to grow. It's going to grow double digit outside the U.S. We think it will be low mid-single digit here in the U.S. Price has been durable. And look, we see Quattro, fastest-growing product in here, took 7 points of market share in the first half, and we continue to see this being best medicine and the most attractive animal health segment. And I see broad-spectrum oral dose continuing to be the top choice for parasiticides globally, and I'm really excited about the European launch coming up. Operator: And our last question comes from Steve Dechert with KeyBanc Capital Markets. Steven Dechert: I guess just on Zenrelia. I mean, it sounds like you're seeing really nice competitive win against NumelviI. Maybe just could you talk about what's driving that? Is there anything beyond just efficacy you can tell us? Jeffrey Simmons: Yes. Zenrelia, as we mentioned, a really great quarter and the continued momentum. It all comes back to efficacy in the derm market, right? And that will be the story we're talking about in 2 years. And what I'm excited about is the whole portfolio that we have coming with Zenrelia and Befrena and the next products. But it's playing out in Europe where you see the multiple products. We've gained share. We continue to grow. We've seen up to 40% shares in Europe. And I think even in the head-to-head study that was just released by a competitor that I mentioned, I think it just continues to demonstrate that, hey, we've got a differentiated product in our opinion that could be best medicine, and it's playing out in the field and anyone in the derm market, if you're going to compete, it's got to work. It's probably the most visible problem to a pet owner if it works or doesn't work and Zenrelia is playing well there. And I would point to a longer runway as we continue to globalize and launch this product. Operator: This concludes the question-and-answer session. I would now like to turn it back to Jeff Simmons, CEO, for closing remarks. Jeffrey Simmons: Thank you for the time and a real call out to the Elanco team for great execution. I want to just emphasize an approach that Bob and I and the team are taking. We've got a lot of potential in the future, and that was my closing comments in the earlier statements. But our approach is going to continue to be measured and balanced one quarter at a time. We'll continue to guide quarterly. We've got a 3-year algorithm out there. We'll look at our pushes and pulls overall, and we'll be very accessible to you as our shareholders in any questions that you have post these calls and between the earnings response. And just know, yes, it is a dynamic marketplace, but our strategy is working. Innovation, portfolio and productivity is delivering growth, innovation and cash. And this first semester, this first 6 months was the best 6 months I've seen since our IPO, but it's been built over the last 6 years. Thank you for joining us today, and we look forward to continuing engaging with you as investors going forward. Have a great day. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Elanco (ELAN) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in Elanco Animal Health Incorporated? Here are five stocks we like better. Strong Q2 performance: Elanco reported revenue of $1.368 billion, up 10% year over year, while adjusted EBITDA rose 21% to $288 million and adjusted EPS increased 31% to $0.34. Pet health drove growth: U.S. and international pet-health revenue increased 11% and 9% organically, respectively, led by Zenrelia and Credelio Quattro. Zenrelia surpassed 2.5 million dogs treated and reached more than 60% of U.S. veterinary clinics. Outlook raised: Elanco lifted its full-year organic constant-currency revenue growth forecast to 6%–7% and expects 2026 innovation revenue of approximately $1.25 billion, while reducing net leverage to 3.1 times. Bullish or Bearish? Vetting Animal Health Care Stocks Elanco Animal Health (NYSE:ELAN) reported second-quarter 2026 revenue of $1.368 billion, up 10% on a reported basis and 8% organically in constant currency, as demand for new pet-health products and strength in U.S. farm animal operations supported growth. Chief Executive Officer Jeff Simmons said the company exceeded the high end of its prior guidance for revenue, adjusted EBITDA and adjusted earnings per share. Elanco raised its full-year outlook for organic constant-currency revenue growth to 6% to 7%, from a prior range of 5% to 7%. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth Zoetis Declares New Dividend, Hinting At Undervaluation “Our strong year-to-date results underscore Elanco’s long-term opportunity,” Simmons said, pointing to product innovation, portfolio breadth and productivity initiatives as the company’s principal growth drivers. U.S. pet health revenue increased 11% organically in constant currency during the quarter, while international pet health revenue rose 9%. Simmons said Elanco gained share across its four major U.S. pet-health categories: dermatology, parasiticides, osteoarthritis pain and vaccines. → Sandisk Just Delivered a Blowout Quarter—Here's Why the Stock Is Falling 2 Contrarian Stock Picks With Major Upside Zenrelia, a dermatology treatment, and Credelio Quattro, a broad-spectrum parasiticide, were the largest contributors to Elanco’s quarterly growth, according to management. Zenrelia reached blockbuster status in July, Simmons said, and the company reported that more than 2.5 million dogs have been treated with the product. Zenrelia was available in approximately 18,000 U.S. veterinary clinics, representing more than 60% of the clinic base, with a reorder rate above 80%, Simmons said. The company said first-line use of Zenrelia had increased to more than 40% of users. Internationally, the product is now available in 47 countries. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High Credelio Quattro gained four percentage points of market share in the second quarter following a three-point gain in the first quarter, according to Elanco. The product was carried by more than half of U.S. clinics at quarter-end, after adding roughly 3,000 clinics from the first quarter. Elanco also highlighted early demand for Befrena, a dermatology product that was soft-launched in May. Commercial product had shipped to about 1,400 U.S. clinics. However, management said supply remains constrained as manufacturing capacity is expanded, with unconstrained supply expected in early 2027. In international over-the-counter parasiticides, AdTab sales increased more than 30%, management said. Simmons described AdTab as the fastest-growing brand in Europe’s approximately $600 million OTC ectoparasiticide category. Elanco’s farm animal business grew 5% organically in constant currency. U.S. farm animal revenue rose 11%, with beef cattle leading growth and support from Experior. International farm animal revenue increased 2%, though management said results reflected shipment timing to the Middle East earlier in 2026; year-to-date international farm animal growth was 7%. Global ruminants rose 17% on a reported basis, including the contribution from recently acquired AHV International and foreign exchange. Simmons said innovation helped support organic constant-currency growth of 12% in Elanco’s beef and dairy portfolio. Experior grew at a double-digit rate in the quarter, though management expects growth to moderate against more difficult comparisons. Bovaer also posted year-over-year growth from a smaller base, with Elanco continuing to invest in long-term initiatives for the product. Revenue from Elanco’s “Big Six” innovation portfolio totaled $340 million in the second quarter. The company raised its 2026 innovation revenue target by $50 million to approximately $1.25 billion. Adjusted gross margin was 58.1%, improving 80 basis points from the prior-year quarter. Chief Financial Officer Bob VanHimbergen said favorable product mix and acceleration in the company’s Elanco Ascend productivity program more than offset inventory-cost pressure. Adjusted EBITDA increased 21% year over year to $288 million, while adjusted EPS rose 31% to $0.34. Operating expenses increased 10% in constant currency, reflecting direct-to-consumer support for new product launches and ongoing research and development spending. Elanco reduced net debt by approximately $90 million during the quarter, bringing net leverage to 3.1 times. The company now expects year-end net leverage of approximately 3 times, improved from its prior 3-to-3.2-times target. Full-year revenue outlook: $5.09 billion to $5.14 billion. Organic constant-currency revenue growth outlook: 6% to 7%. Full-year adjusted EBITDA outlook: $1.01 billion to $1.035 billion. Full-year adjusted EPS outlook: $1.10 to $1.16. Third-quarter revenue outlook: $1.195 billion to $1.22 billion, with organic constant-currency growth of 5% to 7%. For the second half, VanHimbergen said the company expects pricing to accelerate and expects continued benefits from innovation mix and productivity efforts. He also said Elanco plans to continue investing in direct-to-consumer marketing where it sees a strong correlation between spending and market-share gains, particularly for Credelio Quattro. Simmons said Elanco sees pet-owner buying behavior shifting across veterinary, retail and alternative channels rather than declining alongside veterinary visit trends. He said the company’s data showed veterinary home-delivery sales growing nearly twice as fast as in-clinic sales, while the broader U.S. pet-health industry grew at a mid-single-digit rate over the trailing four quarters through the first quarter. Elanco Animal Health Inc is a global leader in animal health dedicated to improving food and companion animal well-being. The company develops, manufactures and markets a range of products, including parasiticides, vaccines, antibiotics and feed additives designed to prevent and treat disease in livestock and pets. Elanco's portfolio spans both food-producing animals—such as cattle, swine, poultry and aquaculture—and companion animals, with offerings that support parasite control, pain management and infectious disease prevention. Originally founded as the animal health division of Eli Lilly and Company in the mid-20th century, Elanco was spun off into an independent publicly traded company in 2018. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Elanco Animal Health Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

This article first appeared on GuruFocus. Revenue: $1.368 billion, up 10% reported; organic constant currency revenue grew 8%. Organic Growth Drivers: 6% increase in volume and 2% contribution from price. Pet Health Revenue (Organic CC): Total grew 11%; US up 11%, International up 9%. Farm Animal Revenue (Organic CC): Total grew 5%; US up 11%, International up 2%. Adjusted Gross Margin: 58.1%, an 80 basis point improvement year over year. Adjusted EBITDA: $288 million, an increase of $50 million or 21% year over year. Adjusted EPS: $0.34, a 31% increase year over year. Innovation Revenue: $340 million in Q2; full-year target raised to approximately $1.25 billion. Net Leverage: 3.1 times in Q2; year-end target improved to approximately 3 times. Full-Year Guidance: Organic CC growth of 6-7%; adjusted EBITDA of $1.01-$1.035 billion; adjusted EPS of $1.10-$1.16. Warning! GuruFocus has detected 5 Warning Sign with ELAN. Is ELAN fairly valued? Test your thesis with our free DCF calculator. Release Date: August 05, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Elanco Animal Health Inc (NYSE:ELAN) delivered 8% organic constant currency revenue growth in Q2 2026, outperforming guidance and leading to a raised full-year outlook. Strong performance in US Pet Health and US Farm Animal, each up 11%, with international pet health up 9%, driven by both price and volume. Zenrelia and Credelio Quattro are major growth drivers, with Zenrelia achieving blockbuster status and Quattro gaining significant market share, supported by strong clinic penetration and DTC investments. Innovation revenue reached $340 million in Q2, with the full-year target raised to $1.25 billion, reflecting robust demand across the 'big 6' products. Balance sheet improvement is ahead of plan, with net leverage reduced to 3.1 times and a revised year-end target of approximately 3 times, enhancing capital allocation flexibility. Gross margin expanded by 80 basis points in Q2, driven by favorable product mix and productivity gains from the Elanco Ascend program, with a clear path to 60% gross margin long-term. Operating expenses increased 10% in constant currency, driven by higher DTC investments and R&D, which may pressure near-term margins. International farm animal growth was only 2% organic in Q2 due to shipment timing to the Middle East, though year-to-date growth is 7%. Brenna, a new dermatology product, is supply-constrained with demand exceeding expectations, and unconstrained supply is not expected until early 2027. The company anticipates moderating growth rates for Experior due to challenging comparisons, and Bovaer growth remains at a measured pace. US pet health growth faces tough comparisons in the second half, though the company expects high single-digit to low double-digit growth. Inflationary pressures and high inventory costs partially offset gross margin gains in the first half, with some impact expected to persist. Q: Can you provide a framework for the contribution of Zenrelia and Credelio Quattro to the 8% organic constant currency growth, and what is the outlook for the second half of the year? A: CFO Bob VanHimbergen noted that while the basket of innovation grew to $340 million, growth was broad-based across the entire portfolio. The US business grew 11%, led by Zenrelia and Quattro, while international growth was driven by Zenrelia and AdTab (up over 30%). The US farm business grew 11% across all species, and international farm grew 2% (7% year-to-date due to shipment timing). The company expects continued robust gains in the second half, with US pet health projected to grow at high single-digit to low double-digit rates. Q: Given the competitive landscape, what are you seeing specifically with respect to pricing in the parasiticide and dermatology markets, and how should we think about the margin outlook for the back half of the year? A: CEO Jeff Simmons stated the market remains responsible on pricing, with a competitor recently taking a midseason MAP price increase, indicating resilient pet owner spending. He noted price acceleration in US pet health from Q1 to Q2, with continued acceleration expected in the second half. CFO Bob VanHimbergen added that gross margin expansion is now expected at 50 basis points year-over-year (up from 40), driven by productivity, volumes, and innovation mix, partially offset by inflation. He emphasized that DTC investments will continue to drive market share gains, with a high correlation between spend and results. Q: What is driving the strong early demand for Brenna, and how should we think about the worldwide opportunity for the product in 2027? A: CEO Jeff Simmons highlighted that 80.3% of US veterinarians surveyed want to use Brenna, and demand expectations have more than doubled from Q1 to Q2. The company is using a gating demand system to manage supply, which is ramping weekly. Supply is expected to reach unconstrained levels in early 2027. Brenna is seen as a key unlock for corporate accounts, and together with Zenrelia, positions Elanco to become a leader in the global dermatology market by the end of the decade. Q: How high can first-line usage for Zenrelia go, and what messaging is driving this trend? A: CEO Jeff Simmons noted that first-line treatment usage has climbed to over 40%, demonstrating growing veterinarian confidence. With 2.5 million dogs treated and availability in 47 countries, the product's efficacy is being validated globally. The company believes Zenrelia is the best medicine for pet owners seeking immediate relief for itching dogs, and expects this trend to continue climbing, with international growth still in early innings. Q: What is the runway for market share gains for Zenrelia and Quattro, and how should we think about the incremental DTC investments in the second half? A: CEO Jeff Simmons highlighted significant runway ahead, with Quattro adding nearly 3,000 clinics in a quarter and gaining 7 points of market share in the first half. International launches in Australia, Japan, and upcoming EU/UK launches provide additional growth opportunities. CFO Bob VanHimbergen emphasized the direct correlation between DTC spend and market share gains, noting the company will continue investing where returns are visible, with no set timeline for scaling back. Q: What are your plans for OpEx going forward, and how much operating leverage should we expect? A: CFO Bob VanHimbergen stated that while OpEx increases are tied to DTC investments, the company expects leverage to improve through 2027. Project Ascend is expected to fund a significant portion of OpEx and drop to the bottom line. He noted a new level of granularity and acceleration in the project, with expectations for continued improvement in operating margins starting in 2027 and beyond. Q: How are competitors responding to Elanco's success, and what is the competitive landscape? A: CEO Jeff Simmons noted that competitors are using more sophisticated direct marketing to target niche markets. Elanco maintains one of the largest rep teams in the industry with strong distribution partnerships. He emphasized that the market remains durable and responsible on pricing, with Elanco's portfolio approach and competitive position strengthening as some competitors restructure and cut reps. Q: How long does herd expansion support growth in the farm animal business, and does the improving balance sheet change your capital deployment strategy? A: CEO Jeff Simmons noted a slow rebuild in beef cattle (up ~1% year-on-year) but strong global demand, with dairy and poultry taking advantage. He highlighted a robust farm animal pipeline across productivity, sustainability, and disease treatment. CFO Bob VanHimbergen confirmed no change to capital allocation strategy: debt paydown remains the top priority, with smaller tuck-under M&A as part of the midterm strategy. Approaching sub-3x leverage will unlock greater flexibility. Q: What is driving the strong uptake of AdTab, and how big can the product become? A: CEO Jeff Simmons highlighted AdTab's 30% growth in the quarter, making it the fastest-growing brand in the nearly $600 million OTC acto category in Europe. The product is on track to become a blockbuster, benefiting from strong Advantage brand loyalty and successful launch capabilities. While comparisons will get tougher, the product is expected to continue leading the growing market. Q: What is driving the competitive wins against the new entrant in the JAK market, and what is the growth outlook for the broad-spectrum parasiticide category? A: CEO Jeff Simmons attributed Zenrelia's success to efficacy, which is the most visible problem for pet owners. He cited a new head-to-head study commissioned by a competitor that reflects Zenrelia's real-world efficacy advantage. For the broad-spectrum market, he noted it's a $1.5 billion market growing double-digit outside the US and low-to-mid single-digit in the US, with Quattro being the fastest-growing product, gaining 7 points of share in the first half. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Elanco Animal Health Incorporated (ELAN) came out with quarterly earnings of $0.34 per share, beating the Zacks Consensus Estimate of $0.27 per share. This compares to earnings of $0.26 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +25.93%. A quarter ago, it was expected that this company would post earnings of $0.34 per share when it actually produced earnings of $0.4, delivering a surprise of +17.65%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Elanco Animal Health, which belongs to the Zacks Medical - Outpatient and Home Healthcare industry, posted revenues of $1.37 billion for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 4.41%. This compares to year-ago revenues of $1.24 billion. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Elanco Animal Health shares have added about 13.1% since the beginning of the year versus the S&P 500's gain of 13%. While Elanco Animal Health has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Elanco Animal Health was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.19 on $1.2 billion in revenues for the coming quarter and $1.11 on $5.05 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Medical - Outpatient and Home Healthcare is currently in the top 41% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. LifeStance Health Group (LFST), another stock in the same industry, has yet to report results for the quarter ended June 2026. The results are expected to be released on August 6. This outpatient mental health services provider is expected to post quarterly earnings of $0.03 per share in its upcoming report, which represents a year-over-year change of +400%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. LifeStance Health Group's revenues are expected to be $414.3 million, up 20% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Elanco Animal Health Incorporated (ELAN) : Free Stock Analysis Report LifeStance Health Group, Inc. (LFST) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Raising Full Year Outlook and Innovation Target, Improving Year-End Net Leverage Ratio Target Second Quarter 2026 Financial Results: Full Year 2026 Guidance: INDIANAPOLIS, Aug. 5, 2026 /PRNewswire/ -- Elanco Animal Health Incorporated (NYSE: ELAN) today reported financial results for the second quarter of 2026, provided guidance for the third quarter of 2026, and updated guidance for the full year 2026. "Elanco's second quarter results demonstrate our momentum and leadership in the attractive animal health industry," stated Jeff Simmons, President and CEO of Elanco. "Organic constant currency revenue growth of 8% was led by U.S. Pet Health and U.S. Farm Animal each up 11%. We saw strong contributions from both price and volume, as consumer demand for our basket of innovation drove market share gains and stabilized our base business. Zenrelia — our newest blockbuster — was the single largest contributor to global Elanco growth, closely followed by Credelio Quattro. As we are raising our top- and bottom-line full-year outlook, including faster than planned margin expansion and net debt deleverage, our consistent delivery demonstrates our Innovation Portfolio Productivity (IPP) strategy is working. We also continue to expect a sustainable mid-single digit CAGR in animal health through the global drivers that matter most in pets and protein. Elanco is well positioned through our differentiated innovation, our comprehensive portfolio, our diverse go-to-market model, and our commercial execution, creating durable value for our customers, our shareholders, and the industry." Select Business Highlights Since the Last Earnings Call Zenrelia™ achieved blockbuster status July YTD; efficacy driving use in approximately 18,000 U.S. clinics; U.S. JAK market share up 9 points year-over-year with gains versus Q1**; up to 40%+ JAK market share in key European markets, outperforming the competitive entrant*** Credelio Quattro™ accelerated dollar share gains of broad-spectrum sales out U.S. vet clinics in Q2, up 4 points versus Q1**; penetrated over 50% of the U.S. clinic base, up approximately 3,000 clinics representing 10 points versus Q1; launched in Australia, Canada, and Japan to date Befrena™ shipped to nearly 1,400 U.S. clinics to date; ramping capacity to meet high customer demand 2x above expectations, with weekly increases in supply Global ruminants was Elanco's fastest growing species, up 12% in the quarter on an organic constant currency basis or 17% including AHV International and FX, as innovation fortified the company's beef and dairy portfolio The company released its 2025 Impact Report, celebrating Elanco's leadership with purpose, and culture of 'Going Beyond' for animals, customers, society, and its people **Per Kynetec data***Internal estimates based on multiple data sources Financial Results In the second quarter of 2026, revenue was $1,368 million, an increase of 10% on a reported basis, or 8% on an organic constant currency basis, compared to the second quarter of 2025. Pet Health revenue was $718 million, an increase of 12% on a reported basis, or 11% on an organic constant currency basis. The year-over-year volume increase of 9% in the second quarter was primarily driven by strong demand for Zenrelia and Credelio Quattro. The 2% increase from price was in line with the company's expectation. The Advantage® Family of products and Seresto® contributed revenue of $154 million and $117 million, respectively. Farm Animal revenue was $633 million, an increase of 9% on a reported basis, or 5% on an organic constant currency basis. Second quarter volumes were up 3%, primarily driven by strong demand across our global ruminant portfolio. Farm animal organic constant currency revenue growth included a 2% increase from price, compared to the second quarter of 2025. Gross profit was $798 million and gross margin percentage was 58.3% in the second quarter of 2026, an increase of 80 basis points compared to the second quarter of 2025. On an adjusted basis, gross profit was $789 million and gross margin percentage was 58.1% in the second quarter of 2026, an increase of 80 basis points compared to the second 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 favorable mix from the strong performance in U.S. Pet Health as well as increased pricing, partially offset by the flow through of higher inventory costs due to inflation. Total operating expenses were $541 million for the second quarter of 2026, an increase of 10% compared to the second quarter of 2025. Marketing, selling and administrative expenses increased 12% to $449 million, driven by strategic investments in the global launches of new products and higher compensation expense. Research and development expenses remained flat at $92 million. Asset impairment, restructuring and other special charges were $9 million in the second quarter of 2026, compared to $1 million in the second quarter of 2025. Charges recorded in the second quarter of 2026 primarily related to the company's 2025 restructuring plan ($3 million) as well as costs associated with our acquisition of AHV ($2 million). Reported net interest expense was $59 million in the second quarter of 2026, an increase of $11 million compared to the second quarter of 2025. The increase was principally due to imputed interest on our liability for sale of future revenue of $15 million, as well as interest expense related to the company's corporate headquarters finance lease, partially offset by lower average debt balances. Adjusted net interest expense, which excludes this imputed interest, was $44 million in the second quarter of 2026, an increase of $6 million compared to the second quarter of 2025. The reported effective tax rate was 3.3% in the second quarter of 2026 compared to 55.4% in the second 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. These factors were partially offset by the impact of current quarter international tax rate changes. The adjusted effective tax rate was 17.8% in the second quarter of 2026 compared to 21.7% in the second quarter of 2025. Net income for the second quarter of 2026 was $54 million, or $0.11 per diluted share on a reported basis, compared with net income of $11 million, or $0.02 per diluted share, for the same period in 2025. On an adjusted basis, net income for the second quarter of 2026 was $174 million, or $0.34 per diluted share, a 31% increase compared with the same period in 2025. Adjusted EBITDA was $288 million in the second quarter of 2026, a 21% increase compared to the second quarter of 2025. Adjusted EBITDA margin was 21.2% compared with 19.2% for the second quarter of 2025. Working Capital and Balance SheetCash provided by operations was $277 million in the second quarter of 2026, compared to cash provided by operations of $237 million in the second quarter of 2025. As of June 30, 2026, Elanco's net leverage ratio was 3.1x adjusted EBITDA, a decrease of 0.5x compared to December 31, 2025. Financial GuidanceElanco is updating financial guidance for the full year 2026, summarized in the following table. "Our strong second quarter performance allows us to both raise our full-year outlook and continue to invest in our innovation products, driving market share gains while expanding the total animal health industry," said Bob VanHimbergen, Executive Vice President and CFO of Elanco Animal Health. "Our faster than expected margin expansion includes good early progress on our Elanco Ascend productivity initiatives, on track to $200 million to $250 million in adjusted EBITDA net savings by 2030. With a net leverage ratio of 3.1x at quarter-end, also faster than expected, we are closing in on our target of reaching below 3x next year, a key milestone that will unlock greater 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 sold to a third party, the company now expects revenue growth of 6% to 7% versus 5% to 7% previously. The company continues to expect an accelerating contribution from price versus 2025. Elanco expects adjusted gross margin of 55.2% to 55.6%, an increase of 50 basis points versus 2025 and compared to the prior expectation of 40 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 third quarter of 2026, as summarized in the following table: In the third quarter, the company anticipates a neutral 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 sold to a third party, the company expects 5% to 7% revenue growth. The company expects operating expenses up approximately 10% year-over-year in constant currency with incremental support for innovation products. The 2026 full year and third quarter financial guidance reflects foreign exchange rates as of the end of July. 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 DETAILSElanco will host a webcast and conference call at 8:00 a.m. Eastern Time today, during which company executives will review second quarter financial and operational results, discuss third quarter and full year 2026 financial guidance, 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/events-and-presentations/default.aspx#module-event-upcoming. ABOUT ELANCOElanco 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 third 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: operating in a highly competitive industry; the success of our research and development (R&D), regulatory approval and licensing efforts; the impact of disruptive innovations and advances in veterinary medical practices, animal health technologies and alternatives to animal-derived protein; competition from generic products that may be viewed as more cost-effective; changes in regulatory restrictions on the use of antibiotics in farm animals; an outbreak of infectious disease carried by farm animals; risks related to the evaluation of animals; consolidation of our customers and distributors; an increased use of alternative distribution channels or changes within existing distribution channels; our dependence on the success of our top products; our ability to complete acquisitions and divestitures and to successfully integrate the businesses we acquire; our ability to implement our business strategies or achieve targeted cost efficiencies and gross margin improvements; manufacturing problems and capacity imbalances, including at our contract manufacturers; fluctuations in inventory levels in our distribution channels; risks related to the use of artificial intelligence in our business; our dependence on sophisticated information technology systems and infrastructure, including the use of third-party, cloud-based technologies, and the impact of outages or breaches of the information technology systems and infrastructure we rely on; the impact of weather conditions, including those related to climate change, and the availability of natural resources; demand, supply and operational challenges associated with the effects of a human disease outbreak, epidemic, pandemic or other widespread public health concern; the loss of key personnel or highly skilled employees; adverse effects of labor disputes, strikes and/or work stoppages; the effect of our substantial indebtedness on our business, including restrictions in our debt agreements that limit our operating flexibility and changes in our credit ratings that lead to higher borrowing expenses and restrict access to credit; changes in interest rates that adversely affect our earnings and cash flows; risks related to the write-down of goodwill or identifiable intangible assets; the lack of availability or significant increases in the cost of raw materials; risks related to foreign and domestic economic, political, legal and business environments; risks related to foreign currency exchange rate fluctuations; risks related to underfunded pension plan liabilities; our current plan not to pay dividends and restrictions on our ability to pay dividends; the potential impact that actions by activist shareholders could have on the pursuit of our business strategies; risks related to tax expense or exposures; actions by regulatory bodies, including as a result of their interpretation of studies on product safety; the possible slowing or cessation of acceptance and/or adoption of our farm animal sustainability initiatives; the impact of increased regulation or decreased governmental financial support related to the raising, processing or consumption of farm animals; risks related to tariffs, trade protection measures or other modifications of foreign trade policy; the impact of litigation, regulatory investigations and other legal matters, including the risk to our reputation and the risk that our insurance policies may be insufficient to protect us from the impact of such matters; challenges to our intellectual property rights or our alleged violation of rights of others; misuse, off-label or counterfeiting use of our products; unanticipated safety, quality or efficacy concerns and the impact of identified concerns associated with our products; insufficient insurance coverage against hazards and claims; compliance with privacy laws and security of information; risks related to environmental, health and safety laws and regulations; and inability to achieve our aspirations or meet the expectations of stakeholders with respect to environmental, social and governance matters. 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 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 InformationWe 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 InformationWe 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 that was 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 IncorporatedReconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information(Unaudited)(Dollars and shares in millions, except per share data) 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 PercentageWe define gross profit as total revenue less cost of sales. We define adjusted gross profit as gross profit less royalty revenue 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 sold to a third party. The following is a reconciliation of GAAP reported gross profit for the three and six months ended June 30, 2026 and 2025, to adjusted gross profit and adjusted gross margin percentage: Adjusted Net Income and Earnings Per ShareWe 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 June 30, 2026 and 2025, to adjusted net income and EPS: The following is a reconciliation of GAAP reported net income and EPS for the six months ended June 30, 2026 and 2025, to adjusted net income and EPS: Adjusted EBITDA and Adjusted EBITDA MarginWe 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 for the three and six months ended June 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 sold to a third party, for the respective periods: Gross and Net Debt and Net Leverage RatioWe 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 June 30, 2026: The following table presents a calculation of our net leverage ratio as of June 30, 2026: Investor Contact: Tiffany Kanaga (765) 740-0314 or [email protected] Media Contact: Colleen Parr Dekker (317) 989-7011 or [email protected] View original content to download multimedia:https://www.prnewswire.com/news-releases/elanco-animal-health-reports-second-quarter-2026-results-302843241.html

The market expects Elanco Animal Health Incorporated (ELAN) to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended June 2026. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates. The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on August 5. On the other hand, if they miss, the stock may move lower. While management's discussion of business conditions on the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it's worth having a handicapping insight into the odds of a positive EPS surprise. This company is expected to post quarterly earnings of $0.27 per share in its upcoming report, which represents a year-over-year change of +3.9%. Revenues are expected to be $1.31 billion, up 5.6% from the year-ago quarter. The consensus EPS estimate for the quarter has been revised 0.28% higher over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period. Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by each of the covering analysts. Price, Consensus and EPS Surprise Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. This insight is at the core of our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction). The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only. A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP. Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell). For Elanco Animal Health, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become bullish on the company's earnings prospects. This has resulted in an Earnings ESP of +3.16%. On the other hand, the stock currently carries a Zacks Rank of #2. So, this combination indicates that Elanco Animal Health will most likely beat the consensus EPS estimate. Analysts often consider to what extent a company has been able to match consensus estimates in the past while calculating their estimates for its future earnings. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number. For the last reported quarter, it was expected that Elanco Animal Health would post earnings of $0.34 per share when it actually produced earnings of $0.40, delivering a surprise of +17.65%. Over the last four quarters, the company has beaten consensus EPS estimates four times. An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss. That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. Elanco Animal Health appears a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release. Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Elanco Animal Health Incorporated (ELAN) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

If you are looking for a stock that has a solid history of beating earnings estimates and is in a good position to maintain the trend in its next quarterly report, you should consider Elanco Animal Health Incorporated (ELAN). This company, which is in the Zacks Medical - Outpatient and Home Healthcare industry, shows potential for another earnings beat. This company has an established record of topping earnings estimates, especially when looking at the previous two reports. The company boasts an average surprise for the past two quarters of 17.91%. For the last reported quarter, Elanco Animal Health came out with earnings of $0.4 per share versus the Zacks Consensus Estimate of $0.34 per share, representing a surprise of 17.65%. For the previous quarter, the company was expected to post earnings of $0.11 per share and it actually produced earnings of $0.13 per share, delivering a surprise of 18.18%. For Elanco Animal Health, estimates have been trending higher, thanks in part to this earnings surprise history. And when you look at the stock's positive Zacks Earnings ESP (Expected Surprise Prediction), it's a great indicator of a future earnings beat, especially when combined with its solid Zacks Rank. Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better produce a positive surprise nearly 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that beat the consensus estimate could be as high as seven. The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Elanco Animal Health has an Earnings ESP of +5.00% at the moment, suggesting that analysts have grown bullish on its near-term earnings potential. When you combine this positive Earnings ESP with the stock's Zacks Rank #3 (Hold), it shows that another beat is possibly around the corner. The company's next earnings report is expected to be released on August 5, 2026. When the Earnings ESP comes up negative, investors should note that this will reduce the predictive power of the metric. But, a negative value is not indicative of a stock's earnings miss. Many companies end up beating the consensus EPS estimate, but that may not be the sole basis for their stocks moving higher. On the other hand, some stocks may hold their ground even if they end up missing the consensus estimate. Because of this, it's really important to check a company's Earnings ESP ahead of its quarterly release to increase the odds of success. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Elanco Animal Health Incorporated (ELAN) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research