Full Press Release Details
Investor Contact: Kathryn Grissom (317) 273-9284 or kathryn.grissom@elancoah.com
Media Contact: Colleen Parr Dekker (317) 989-7011 or colleen.dekker@elancoah.com
Elanco Animal Health Reports Fourth Quarter
and Full Year 2021 Results
GREENFIELD, IN (February 24,
2022) - Elanco Animal Health Incorporated (NYSE: ELAN) today reported its financial results for the fourth quarter and full
year 2021, and provided initial guidance both for the first quarter and full year 2022.
"2021 was a historic year for Elanco as we completed our independent
company standup, continued our integration of Bayer Animal Health and recorded our highest revenue and adjusted EBITDA levels as a public
company. We grew revenue 7 percent compared to our 2020 pro forma combined company estimates, including 10 percent in Pet Health and 6
percent in Farm Animal," said Jeff Simmons, president and CEO of Elanco. "The fourth quarter of 2021 represents our 5th consecutive
quarter of outperforming our expectations. Our diverse portfolio delivered across the business - growing in all three regions and
in four out of five species, demonstrating the durable growth profile of our business. None of this would be possible without the dedicated
customers we serve and the commitment and ownership mindset of our global Elanco team. The resiliency they demonstrated and their disciplined
focus on execution was central to where we are today. We carry this momentum into 2022, anticipating 2 to 3 percent revenue growth on
a constant currency basis and 10 percent adjusted EBITDA and 15 percent adjusted EPS growth at the midpoint of our guidance, with seven
new product approvals and launches and 5 to 7 new product submissions expected."
| Fourth Quarter Results (dollars in millions, except per share amounts) | 2021 | 2020 | Change ($) | Change (%) | ||||||||||||
| Revenue | $ | 1,113 | $ | 1,140 | $ | (27 | ) | (2 | )% | |||||||
| Reported Net Loss | $ | (97 | ) | $ | (323 | ) | $ | 226 | 70 | % | ||||||
| Adjusted EBITDA | $ | 212 | $ | 176 | $ | 36 | 20 | % | ||||||||
| Reported EPS | $ | (0.20 | ) | $ | (0.66 | ) | $ | 0.46 | 70 | % | ||||||
| Adjusted EPS | $ | 0.21 | $ | 0.12 | $ | 0.09 | 75 | % |
| Full Year Results (dollars in millions, except per share amounts) | 2021 | 2020 | Change ($) | Change (%) | ||||||||||||
| Revenue | $ | 4,765 | $ | 3,273 | $ | 1,492 | 46 | % | ||||||||
| Reported Net Loss | $ | (472 | ) | $ | (560 | ) | $ | 88 | 16 | % | ||||||
| Adjusted EBITDA | $ | 1,057 | $ | 529 | $ | 528 | 100 | % | ||||||||
| Reported EPS | $ | (0.97 | ) | $ | (1.27 | ) | $ | 0.30 | 24 | % | ||||||
| Adjusted EPS | $ | 1.05 | $ | 0.47 | $ | 0.58 | 123 | % |
Highlights Since Last Earnings Call:
Fourth Quarter Reported Results:
In the fourth quarter of 2021, revenue was $1,113 million, a decrease
of 2 percent, compared with the fourth quarter of 2020. Revenue growth was unfavorably impacted by approximately $60 million of previously
disclosed items that benefited the fourth quarter of 2020, including a purchasing shift by a large U.S. pet health customer, a short-term
competitor stock-out benefiting our U.S. cattle vaccines and implants business, the exit of certain products and reduced contract manufacturing
from the sale of the Shawnee, KS manufacturing facility and discontinued production of human growth hormone for Eli Lilly and Company,
our former parent company, at the end of 2020. The business grew in pet health, poultry and aqua, and from innovation-related sales, partially
offset by pressure in the China swine business.
Pet Health revenue decreased
1 percent for the quarter and was flat when excluding the unfavorable impact from foreign exchange rates. Price growth across the portfolio
and volume growth in a number of brands including Credelio , Galliprant , Advocate , vaccines and the addition of innovation
products, was more than offset by the impact of competitive pressure on older generation parasiticides and the impact of an approximate
$10 million purchasing pattern shift by a large U.S. customer into the fourth quarter of 2020 from the first quarter of 2021. Seresto
and the Advantage family of products contributed $60 million and $104 million of revenue in the quarter, respectively.
Farm Animal revenue decreased
1 percent for the quarter and was flat excluding the unfavorable impact from foreign exchange rates. Performance was driven by growth
in global poultry and aqua as a result of improved conditions related to the COVID-19 pandemic and the addition of innovation products,
which was more than offset by a decline in the China swine business from pressured producer profitability and the unfavorable impact of
exiting certain products since the fourth quarter of 2020 and from a short-term competitor stock-out benefiting our U.S. cattle vaccines
and implant business in the fourth quarter of 2020.
Contract Manufacturing
represents contract manufacturing relationships which are not long-term value drivers for the company. Contract Manufacturing represented
1 percent of total revenue in the quarter and decreased 48 percent compared to the fourth quarter of 2020. The decrease is primarily driven
by the impact from the sale of the Shawnee, KS manufacturing site and discontinued production of human growth hormone for Eli Lilly and
Company, our former parent company, at the end of 2020.
Gross profit was $601 million,
or 54.0 percent of revenue, in the fourth quarter of 2021 compared with $544 million, or 47.7 percent, for the fourth quarter of 2020.
Gross margin increased 630 basis points, with 500 basis points attributable to the negative impact of the amortization of inventory fair
value adjustments recorded from the acquisition of Bayer Animal Health in the fourth quarter of 2020. Further improvement was driven by
continued benefits from manufacturing productivity, and improved price and mix, partially offset by increased costs due to inflation.
Total operating expense was
$421 million, a decrease of $66 million, or 14 percent, compared with the fourth quarter of 2020. Marketing, selling and administrative
expenses decreased $45 million to $329 million and research and development expenses decreased $21 million to $92 million,
from the realization of synergies associated with restructurings and disciplined cost management.
Amortization of intangibles decreased $25 million to $139 million
in the fourth quarter of 2021 as compared with the fourth quarter of 2020, primarily from a measurement period adjustment in the first
quarter of 2021 that decreased the fair value of intangible assets recorded from the acquisition of Bayer Animal Health. Asset impairment,
restructuring, and other special charges decreased to $110 million in the fourth quarter of 2021 from $167 million in the fourth
quarter of 2020, primarily due to decreases in integration and acquisition costs and asset impairment and write-down charges, partially
offset by an increase in severance costs.
Net interest expense was $55 million in the fourth quarter of
2021, compared with $60 million in the fourth quarter of 2020. Tax benefit was $24 million in the fourth quarter of 2021. The fourth
quarter of 2021 included a valuation allowance against $40 million of deferred tax assets.
Net loss for the fourth quarter of 2021 was $97 million and $0.20
per diluted share, compared with a net loss of $323 million for the same period in 2020.
Fourth Quarter Non-GAAP Results:
For the fourth quarter of 2021, adjusted gross margin increased 130
basis points to 54.0 percent of revenue, driven by continued improvements in manufacturing productivity, and improved price and mix, partially
offset by increased costs due to inflation. Adjusted net income for the fourth quarter increased to $105 million, which excludes the net
impact of $202 million of asset impairment, restructuring and other special charges, the amortization of intangible assets and other adjusting
items, net of the impact from taxes (including the valuation allowance applied to deferred tax assets). Our adjusted effective tax
rate for the fourth quarter was 14.6 percent driven by certain favorable return to provision results. Adjusted EPS in the quarter was
$0.21 per share, an increase of 75 percent as compared to the fourth quarter of 2020. Adjusted EBITDA was $212 million in the fourth quarter
of 2021, an increase of 20 percent compared to the fourth quarter of 2020. Adjusted EBITDA as a percent of revenue was 19.0 percent compared
with 15.4 percent for the fourth quarter of 2020, an improvement of 360 basis points.
Full Year Reported Results:
For the full year 2021, total revenue was $4,765 million, or an increase
of 46 percent over the previous year, including an additional $1,311 million of Bayer Animal Health product revenue in the full year
2021 compared to the full year 2020.
Pet Health delivered revenue
of $2,351 million, including an additional $855 million of Bayer Animal Health product revenue in the full year 2021 compared to
the full year 2020. Results exceeded the company's expectations as many key brands experienced double-digit growth including Credelio, Interceptor
Plus, Advocate, vaccines, and Galliprant, which became a blockbuster in 2021. In parasiticides, the international business delivered strong
growth driven by Seresto, Advocate and the Credelio franchise, while the U.S. was impacted by competitive pressures, primarily impacting
older generation products.
Farm Animal delivered revenue
of $2,332 million, including an additional $417 million of Bayer Animal Health product revenue in the full year 2021 compared to
the full year 2020. Rumensin continued to fare better than initial expectations regarding market share despite nearly
2.5 years of generic competition. In the second half of 2021, global poultry and aqua markets benefited from improving economic conditions
as the COVID-19 pandemic eased in many markets. These tailwinds were partially offset by pressured producer profitability in the China
swine market and the impact of a short-term competitor stock-out benefiting our U.S. cattle vaccines and implant business in the fourth
Contract Manufacturing
represented 2 percent of total revenue for the full year 2021 and increased 3 percent compared to the full year 2020. The increase was
driven by the addition of $39 million from Bayer Animal Health, offset by the impact of the sale of the Shawnee, KS manufacturing
site and discontinued production of human growth hormone for Lilly at the end of 2020.
Gross profit was $2,631
million, 55.2 percent of revenue, for the full year 2021, an increase of 610 basis points compared to the full year 2020, primarily due
to the benefit from inclusion of the legacy Bayer Animal Health portfolio for the full year, continued improvements in manufacturing productivity,
improved price and mix, as well as a favorable comparison to 2020, which was impacted by $26 million higher amortization of inventory
fair value adjustments recorded from the acquisition of Bayer Animal Health, partially offset by increased costs due to inflation.