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Elanco Animal Health Posts Q1 2024 Results

05/10/2024

In a press release dated May 8th, Elanco Animal Health (ELAN) reported on Q1 FY 2024 ending March 31st. Elanco beat on EPS and on the top line by 2.2 percent against consensus estimates. For the period, the company posted net income of $32 million on revenue of $1,205 million with a diluted EPS of $0.06. For the corresponding Q1 FY2023, The Company earned $103 million on sales of $1,257 million with a diluted EPS of $0.21.  Comparing Q1 2024 with Q1 202:-

 

  • Revenue declined by 0.6 percent
  • Gross margin declined from 60.7 to 57.3 percent
  • Operating margin declined from 28.2 to 22.1 percent

 

During Q1 2024 sales to the livestock sector attained $556 million, representing 46.1 percent of total company sales. Sales to the poultry sector amounted to $197 million representing 16.3 percent of Company sales. Sales of companion animal products attained $639 million or 53.0 percent of the Company total.

 

The Company recently announced the divestment of their aquaculture business with quarterly sales of $31 million to Merck Animal Health for $1,300 million in cash.

 

Guidance for FY 20234 included revenue of $4,460 to $4,519 million but with a net loss ranging from $(3) to $(45) EPS will range from a negative $(0.88) to $(0.96).

 

In commenting on results, Jeff Simmons, CEO stated, “Elanco's strong business momentum continued in the first quarter, reinforced by the diversity of our portfolio and balanced geographic presence. We delivered estimated revenue growth of 3% to 5% in the first quarter, excluding the impact of the ERP blackout from last year, and exceeded the topend of our guidance range for revenue, adjusted EBITDA and adjusted EPS in the quarter. These results follow the 5% revenue growth we delivered in the last two quarters of 2023. We are increasing our new product sales expectations, led by

 

Experior® and AdTab®, and our innovation is enhancing the durability of our base portfolio with customers, allowing us to raise our full year constant currency revenue growth range to 2% to 3%." He added, "Additionally, we improved operating cash flow by nearly $150 million year over year in the first quarter as a result of our disciplined focus on improving net working capital and the benefit of completing our ERP system integration."

 

Simmons continued, "We are encouraged by the strong progress of our late-stage pipeline, which has advanced significantly over the last several months. Based on our dialogue with the FDA and the status of packages submitted, we have increased certainty in the expected approval timing for Bovaer®, Zenrelia™ and Credelio Quattro™. We continue to expect to bring differentiated products to the market, with revenue contribution expected from all three new products in the second half of 2024."

 

This self-adulatory statement is at variance with the reality of continued losses, shareholder disaffection and loss of technical and marketing talent.

 

Ancora an investment group with three percent of the equity proposed a slate of independent candidates to be added to the 12-person Board to replace four retiring members. Ancora characterized the current Board and CEO as “barriers to success”.

 

On December 31st ELAN posted total assets of $14,019 million including goodwill and intangibles of $8,674 million with long-term debt of $6,201 million. On May9th the market capitalization attained $8,350 million The Company has traded over the past 52-weeks in a range of $7.88 to $17.38 with a 50-day moving average of $14.97.

 

On a twelve-month trailing basis, operating margin was 1.6 percent and profit margin -27.9 percent.  The company achieved a return on assets of 1.4 percent and -18.2 percent on equity.

 

After meeting with Ancora and following release of FY 2023 earnings, Elanco announced a program to enhance shareholder value. This included a shift from livestock to higher-margin companion animal products, cancellation of 420 positions with layoffs and changes in representation and distribution to reduce costs.  At the insistence of Ancora, Kathy Turner a veteran of IDEX and Craig Wallace were added to the Board.