Q4 2025 Elanco Animal Health Inc Earnings Call Transcript
Key Points
- Elanco Animal Health Inc (ELAN) reported a strong fourth quarter with 9% organic constant currency revenue growth, outperforming the high end of guidance for revenue, adjusted EBITDA, and adjusted EPS.
- The company achieved significant growth in the US farm animal segment, up 17%, and US pet health, up 10%, marking 10 consecutive quarters of underlying total growth.
- Innovation revenue exceeded expectations in 2025, reaching $892 million, with a raised 2026 outlook for innovation to $1.15 billion.
- Elanco improved its net leverage ratio faster than planned to 3.6 times at year-end, with expectations to finish 2026 at 3.1 to 3.3 times.
- The company gained market share in every major category for US Pet Health in 2025, including prescription parasiticides, osteoarthritis pain, dermatology, and vaccines.
- Despite strong revenue growth, adjusted EPS decreased by 7% year-over-year in the fourth quarter due to an anticipated higher tax rate.
- The adjusted gross margin increased only slightly by 30 basis points to 51.2%, impacted by higher inventory costs and inflationary pressures.
- Operating expenses grew by 10% in constant currency, driven by strategic investments in global pet health product launches and R&D pipeline development.
- The company faces competitive pressures, including generics within the market, which could impact future growth.
- Elanco's guidance for 2026 includes a cautious approach, with organic constant currency revenue growth expected at 4% to 6%, reflecting a balanced view of potential headwinds and tailwinds.
Ladies and gentlemen, thank you for standing by. Welcome to Elanco Animal Health fourth quarter 2025 earnings conference call. (Operator Instructions)
I'd now like to hand the call over to Tiffany Kanaga, Vice President of Investor Relations. You may begin.
Good morning. Thank you for joining us for Elanco Animal Health's fourth quarter 2025 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
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