Q1 2025 Elanco Animal Health Inc Earnings Call
Speaker Change: Ladies and gentlemen, thank you for standing by. Welcome to Elanco Animal Health first quarter 2025 earnings conference call.
Speaker Change: Good morning, Thank you for joining us for a lack of animal health first quarter 2025 earnings call I'm, Tiffany Konaga, Vice President of Investor Relations and ESG. Joining me on today's call are Jeff Simmons, our President and Chief Executive Officer, Todd Young, our Chief Financial Officer, and Beth Hany from Investor Relations.
Speaker Change: Slides referenced during this call are available on the Investor Relations section of a lack of dot com.
Speaker Change: These discussions 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.
Speaker Change: For more information see the risk factors discussed in today's earnings press release as well as in our Form 10-K, and 10-Q filed with the SEC, we do not undertake any duty to update any forward looking statements.
Speaker Change: Our remarks today will focus on our non-GAAP financial measures reconciliations of these non-GAAP measures are included in the appendix of todays slides and in the earnings press release.
Speaker Change: References to organic performance exclude the estimated impact of the Aqua business, which was divested July nine 2024.
Jeff Simmons: After our prepared remarks, we'll be happy to take your questions I will now turn the call over to Jeff.
Jeff Simmons: Thanks, Tiffany and good morning, everyone, you ankle exceeded first quarter guidance for revenue adjusted EBITDA and adjusted EPS, continuing our momentum from the end of 2024, we've delivered a high quality quarter with 4% organic constant currency revenue growth evenly driven by price and volume. This strong Q1 performance.
Jeff Simmons: Resent, our seventh quarter of underlying growth.
Jeff Simmons: On the innovation after delivering $198 million of first quarter revenue from our new products, we are raising our full year expectations to $660 million to $740 million. We are pleased by the commercialization of our basket of six potential blockbusters with the most recently launched product Cornelio Quad.
Jeff Simmons: Throw off to a great start surpassing our expectations to date.
Jeff Simmons: With a relentless focus on cash we are deleveraging faster than planned and proving our net leverage target for year end to three 9% to four three times, reflecting strong working capital performance favorable currency and the monetization of a lot of land our U S royalty stream for $295 million.
We announced earlier this week.
Jeff Simmons: Looking ahead, we have raised our 2025 full year revenue guidance for FX, and we are maintaining our outlook for organic constant currency growth of 4% to 6%. We continue to expect accelerating quarter on quarter growth with Q2 up 4% to 6%.
Jeff Simmons: March and April trends have provided early proof points and innovation continues to ramp on top of a strong base business.
Jeff Simmons: We also continue to expect full year, adjusted EBITDA of $830 million to $870 million and adjusted EPS of <unk> 80 to 86.
Jeff Simmons: The <unk> strategy is working and offsetting external uncertainty our prudent approach recognizes our first quarter outperformance recent momentum and favorable FX balanced by expected tariff impact and a dynamic macroeconomic backdrop.
Jeff Simmons: Our execution and are wanting langkow global operating model give us the agility needed to cover various scenarios that may emerge in this external environment, including tariff and trade impacts regulatory and policy changes and shifts in the consumer sentiment in spending we have a dedicated team implementing a multi faceted intervention plans.
Jeff Simmons: To allow us to deliver even during these turbulent times and we will remain focused on growth innovation and cash as the right priorities to expand our long term value proposition.
Jeff Simmons: Let's take a moment to walk through how we're covering our expected tariff exposure on slide five you will remember that with our late February call, we outlined $3 million to $4 million of potential impacts from the first 10% imposed on China, we would strongly caution against extrapolating that impacted the 145% imposed today.
Jeff Simmons: Without also considering the pharmaceutical exemption and our intervention plans already in action since late February we've begun implementing several mitigating strategies, including supply chain optimization inventory management tactical pricing in select geographies and strategic API sourcing we believes that.
Jeff Simmons: Total net impact in 2025 to <unk> adjusted EBITDA from tariffs as they stand as of May 5th is an estimated $16 million to $20 million almost entirely related to the tariffs imposed by the U S and China. This negative impact is fully offset by our first quarter outperformance as we are.
Jeff Simmons: Maintaining our full year, adjusted EBITDA and adjusted EPS guidance.
Jeff Simmons: We have a balanced profile of risks and further mitigating strategies also allowing for maintain guidance, while we benefit from the farm exemption today. If this policy is removed and a 5% to 25% tariff is imposed we estimate our incremental exposure at $10 million to $30 million in 2025. This rich.
Jeff Simmons: <unk> and others, including potential economic slowdown are offset by anticipated foreign exchange favorability based on April rates and a targeted value based pricing increase <unk> is well positioned to overcome macroeconomic challenges and uncertainty to deliver our plan.
Jeff Simmons: Turning to the first quarter revenue performance on slide six we break down the 4% underlying organic constant currency revenue growth. This chart highlights the importance of our diverse portfolio with three of our four business areas growing.
Jeff Simmons: We achieved the top end of our expected growth range in Q1, despite the challenging U S retail backdrop in January and February our U S. Retail business declined 21% during that two months period, driven by cooler weather that significantly impacted consumer spending January was the coldest on record since 1988.
Jeff Simmons: <unk> reported by the CDC attracted an eight year low importantly retailers are broadly observed that when the weather cooperates consumers engage citing better trends into this spring our results support this with March rebounding to a positive 13% growth and strength carrying into April as we enter the <unk>.
Jeff Simmons: Part of the North American Parasiticide season.
Jeff Simmons: Our leadership in the U S retail market has never been more relevant with the consumer under pressure, we provide a superior value proposition for pet owners with our strong OTC portfolio and broad physical availability in the U S. Vet clinic, our revenue was flat in the quarter importantly, as we do.
Jeff Simmons: <unk> on our earnings call a year ago, we are lapping an approximate $13 million benefit related to moving certain legacy Bayer products into distribution. Excluding this impact in the comparison, our vet clinic revenue growth would be approximately 8% we benefited from the early in ramping contributions.
Jeff Simmons: From Cordero, Cuatro, and Xen, <unk>, which I will cover more in depth shortly.
Jeff Simmons: Altogether, we see a rebounding retail environment. Good early traction for our innovation and a solid underlying fundamentals and our portfolio all driving our expectation for U S. Pet health to return to a step up in growth in Q2.
Jeff Simmons: Moving now to international Pet Health, we delivered 5% organic constant currency revenue growth driven by AD tab, <unk> and <unk>, our international Pet Health business remains a clear example of the value of innovation with new products driving two percentage points of growth for totally langkow in the quarter specifically.
Jeff Simmons: <unk> more than doubled its revenue in the first quarter compared to last year and we continue to be very pleased with <unk> performance in Brazil, Canada and Japan.
Jeff Simmons: The power of innovation and a diverse portfolio is also clear in the U S farm animal business up 17% with continued strength in cattle exterior again led the way with rapid adoption and heifers since we received FDA combo clearance in November.
Jeff Simmons: International Farm was up 2% and organic constant currency with growth in ruminants, partly offset by the impact of the capstone recall enter commercial model changes and certain geographies from last year. We estimate. These two items created a combined four percentage point headwind to our year over year growth.
Jeff Simmons: Looking at slide seven we delivered $198 million of innovation revenue in the first quarter. This outperformance with growing momentum from our big six portfolio of potential blockbusters leads us to increase our expected innovation contribution for 2025 by $20 million at both ends of the range to 600.
Jeff Simmons: $60 million to $740 million, we expect a consistent flow of high impact innovation to fuel our growth for the next decade through targeted areas, including our monoclonal antibody platform in the near term. We continue to expect this platform to deliver our IL 31 approval in the fourth quarter of this year.
Jeff Simmons: With commercialization in the first half of 2026, we remain in close dialogue with the USDA, where we believe recent changes have not materially impacted the review team and process.
Jeff Simmons: Let's dig deeper on the progress of these six products on slide eight starting with <unk> <unk> is our entry into the one 9 billion rapidly growing global dermatology market and it continues to make meaningful strides in clinic penetration Zen rally is now used in approximately 11000 U S vet clinics or 35% of the total.
Jeff Simmons: <unk> up from 8000 total clinics when we updated you in late February.
Jeff Simmons: Of this 11000 today about 8000 of fully adopted the product and about 3000 or piloting use.
Jeff Simmons: And in line with positive trends broadly across our U S. Pet health business, we're encouraged by the progression of the Zen relative sales importantly.
Jeff Simmons: Importantly, as vats experienced the strong and consistent efficacy of the product firsthand. They are responding one in three clinics that have received samples has purchased centralia and integrated it into their derm portfolios or reorder rates have climbed to 70% up approximately 10 percentage points since late February.
Jeff Simmons: And we expect continued momentum as we've entered the allergy season. Our survey work shows that 26% of that's not using <unk> today expect to use it in the future with the majority of that cohort, citing seasonal allergies and frustration with current options cut.
Jeff Simmons: Customers are responding to with broadly positive reviews, applauding the efficacy convenience and the value of the product. We are continuing with targeted outreach to pet owners and we are increasing our focus on tested tax sessions, which have proven to be highly effective the biggest challenge we face in the U S for Zen rally is moving beyond second line.
Jeff Simmons: <unk>, where it has been positioned in various clinics also we're actively engaged in the process to update the U S label data supporting a language change on the current label is already under <unk> review and we expect to receive feedback later. This year. In addition, we have already initiated new studies for a more comprehensive.
Jeff Simmons: I've labeled change overall, we continue our robust engagement with the FDA and we will keep you updated with our progress on both fronts.
Jeff Simmons: Outside the U S, where we have less restrictive labels. We are very pleased with the launch of <unk> in Brazil, Canada and Japan.
Jeff Simmons: Which is a great start to capturing share in the $600 million to $700 million International dermatology market, Brazil. The first international market to launch has outperformed our initial expectations for both penetration and sales with efficacy being a key driver for switching to US then rallied we continue to expect approvals in <unk>.
Jeff Simmons: Europe, the UK and Australia this year.
Jeff Simmons: Moving to crude Elio Cuatro, we launched and shipped product in January ahead of the Parasiticide season. We are very encouraged by the early results with share capture ahead of expectations. While cannibalization has also been favorable to our assumptions in a span of just a few short months, we've already achieved approximately 10%.
Jeff Simmons: Share a broad spectrum sales in the U S. Vet clinics approximately two thirds of share capture has come from competitive broad spectrum in deco products or new starts highlighting the high veterinary interest in <unk> differentiated profile.
Jeff Simmons: All of our distributors have ordered multiple times within the quarter and inventories at distribution are still running relatively lean we attribute our initial success to strong that response to the three dimensions of differentiation for Cardello Cuatro first broad coverage, including multiple species of tapeworms the speed of <unk> and <unk>.
Jeff Simmons: Heartworm coverage from month one.
Jeff Simmons: Both vet clinics and pet owners have proactively shared how pleased they are with the palatability of crude Elio quadro to docs, having seen this robust clinic demand, we're now increasing DTC investment to activate even more pet owners. We're also preparing for a global launch with approval submissions made in Australia, Canada and Japan.
Jeff Simmons: In Europe, our pet health business has been led by the strength of add tap, our OTC flea and tick product for both dogs and cats, we've seen accelerating growth doubling sales year over year with a clear runway for further gains add tab was approved and launched in the U K in April and we are strategically.
Jeff Simmons: <unk>, increasing brand building DTC in the second quarter beyond our initial expectations, reflecting the attractive returns we're seeing on our investment add tab is quickly gaining share and we're also seeing minimal cannibalization of our existing portfolio.
Jeff Simmons: Finally in pet health, our canine parvovirus monoclonal antibody is the first and only USDA conditionally approved treatment for Parvo may.
Jeff Simmons: Making C. PMA widely available is crucial in our fight against this devastating virus, including in shelter environments, where resources are often strained we are focused on increasing access to this life saving treatment and we continue to explore strategic interventions to address the cost of treatment and to accelerate clinic penetration.
Jeff Simmons: Across all channels.
Jeff Simmons: And farm animal experience continues to rapidly grow in a market, which we now estimate has potential size of over $350 million in the U S and Canada with other additional international expansion opportunities. We have unlocked more of this market for experience through the benefit of the U S. Heifer clearance in November we're.
Jeff Simmons: An experienced growth trajectory in the U S and Canada and the products continued ability to drive overall portfolio benefits.
Jeff Simmons: Lastly, with respect to <unk>, we remain encouraged by the strong demand from dairy farmers and Cpg's since February we doubled the number of towers on the product however, adoption and our margins have been impacted near term as government incentives have not yet been released moving forward to optimize <unk> economic value and to enhance.
Jeff Simmons: Dairy farmer flexibility, we intend to expand our label as well as lower manufacturing costs importantly that both their demand is robust with April being our most significant month of new cow, starting while customer retention is high consistent with farm animal feeding like experience.
Jeff Simmons: We do believe that both are can become another farm animal a langkow blockbuster and create the next major market and farm animal health.
Jeff Simmons: Overall, the basket of the big six innovations is outperforming and driving accelerating growth for the entire company.
Jeff Simmons: Moving to slide nine we highlight all three elements of our IPP or innovation portfolio and productivity strategy, our innovation builds on our portfolio, which remains a key source of our resilience, enabling this robust growth even in challenging times, our diverse durable product portfolio is balance.
Jeff Simmons: Across geographies and species and U S. Pet health, we gained share in each of the four key markets and our comprehensive portfolio para instead derm and vaccines.
Jeff Simmons: Vet clinics prioritize partners, who offer a complete set of solutions, allowing us to leverage innovation to lift our broader pet health portfolio. As an example over 500 U S clinics that adopted credential Cuatro and Q1 also bought for the first time every land co products and U S farm animal.
Jeff Simmons: We continue to build on our market leadership and targeted innovations like proud of lacks a treatment for bovine swine respiratory disease conveniently given as a one low volume shot bolstering our wide portfolio of solutions.
Jeff Simmons: Finally on productivity earlier this week, we announced the monetization of a lot of land or milestones in U S. Royalties for $295 million. This is a great example of <unk> pioneering new value streams, and translating animal health and human health.
Jeff Simmons: Monetizing this non core part of our portfolio accelerates our deleveraging objective.
Jeff Simmons: The transaction combined with our more favorable foreign exchange rates positively impacting our cash balances and additional improvements in working capital is driving our net leverage target for 2025 down to three 9% to four three times adjusted EBITDA. We also remain focused on the cost.
Jeff Simmons: <unk> as an element within our control in this challenging macro backdrop, while we still strategically continue to invest in our innovation product launches and the expansion of our outward Kansas in Fort Dodge, Iowa facilities, which are progressing as planned.
Jeff Simmons: Our ongoing companywide productivity agenda was further evidenced by the gross margin expansion in the quarter driven by better than expected manufacturing performance with good management of absorption losses and expenses with that I'll pass it to Todd to provide more on the first quarter results and financial guidance.
Todd Young: Thank you, Jeff and good morning, everyone. Today I'll focus my comments on our first quarter adjusted measures. So please refer to today's earnings press release for a detailed description of the year over year changes in our reported results.
Todd Young: On slide 11, we delivered $1 $193 billion of revenue, representing a decrease of 1% on a reported basis.
Todd Young: Excluding the unfavorable impact of foreign exchange rates and the divestiture of our Aqua business, we achieved organic constant currency growth of 4% compared to the first quarter of 2020 for price and volume each contributed 2% in the quarter.
Todd Young: Relative to our Q1 guidance in February we had an $11 million sales.
Todd Young: The weaker U S dollar.
Todd Young: Slide 12 shows revenue by the four quadrants of our business.
Todd Young: Total pet health revenue increased 1% in constant currency in the first quarter with price growth of 2% in the U S. Total revenue declined 3% driven by a headwind to growth for moving certain legacy bear products into distribution and Q1 reported 24, a challenging retail environment and soft demand for vaccines.
Todd Young: Offset by sales from key innovation products.
Todd Young: Outside the U S. Our pet health business grew 5% in constant currency driven by continued strong demand of AD tab across Europe, and credo and multiple geographies.
<unk> sales in three international markets contributed while soft demand in the China market was a headwind in the quarter.
Todd Young: Globally, our farm animal business achieved 7% growth in organic constant currency.
The U S farmer metal business grew 17% driven by continued demand for expire from the launch of <unk> in the quarter. This growth was partially offset by the expected timing of poultry rotations.
Todd Young: Outside the U S. Our fundamental business contributed 2% organic constant currency strength in cattle swine and APAC was partially offset by the tough comparable from the Q2 2020 for textile recall and our strategic do different approach in certain geographies.
Todd Young: Continuing down the income statement on slide 13, gross margin increased 10 basis points to 57, 4% due to price strong manufacturing performance and beneficial product mix, even with the challenge of our highest margin business U S OTC declining in the quarter.
Todd Young: These positive factors were partially offset by inflation and foreign exchange headwinds.
Todd Young: Operating expenses rose, 3% year over year, this quarter, driven by industrial supporting our pet health product launches and continued R&D investments focused on our late stage pipeline and geographic expansion opportunities.
Interest expense was $40 million compared to $66 million last year with the savings primarily attributable to the significant debt reduction achieved in 2024 from the divestiture of our Aqua business.
Todd Young: Slide 14 compares Q1, adjusted EBITDA year over year adjusted.
Todd Young: Adjusted EBITDA was $276 million, a decrease of $18 million.
Todd Young: Excluding the impact of the Aqua Divesture and foreign exchange headwinds adjusted EBITDA increased $8 million in the quarter, reflecting on the underlying business strength.
Todd Young: Approximately $5 million of adjusted EBITDA relative to our February guidance came from the weaker U S dollar that benefited revenue.
Todd Young: Adjusted EPS was <unk> 37 in the quarter to 3% year over year improvement was primarily driven by a favorable discrete tax rate benefit and the interest expense savings from debt reduction, resulting from the July 2020 for Aqua divestiture.
Todd Young: On slide 15, we provide an update on our cash debt and working capital.
Todd Young: Cash used from operations was $4 million in the quarter, reflecting typical seasonality of our cash usage. We ended the quarter with net debt of 393 3 billion and a net leverage ratio of four four times adjusted EBITDA.
Todd Young: Now, let's move to our financial guidance starting on slide 17, we are maintaining our expectations for organic constant currency revenue growth of 4% to 6%, while raising our revenue dollar range to reflect approximately $65 million to $70 million from the favorable impact of foreign exchange rates since the February earnings call. We have good line of sight to the mid single.
Todd Young: Visit growth given the strong Q1 performance already at 4% with our innovation quickly ramping on top of the stable base.
Todd Young: We continue to expect operating expenses to be up approximately 6% in constant currency with strategic investments in the global launches of our innovation portfolio.
Todd Young: We also continue to expect each one to represent a relatively smaller portion of full year adjusted EBITDA versus the 61% weighting in 2024 and 2023 as the first half commercial investments impact operating expenses earlier in the year and then they drive greater contributions to revenue in the second half.
Todd Young: Yes.
Todd Young: Our adjusted EBITDA and adjusted EPS ranges are unchanged from February our year to date performance proactive intervention plans covering various scenarios around tariffs and a foreign exchange tailwind are balanced by macroeconomic challenges and uncertainty we have reasons to feel confident in our ability to deliver our 2025 goals.
Speaker Change: Including the accelerating trends, we are seeing in March and April however, as Geoff explained a prudent approach is warranted in this dynamic environment.
Speaker Change: We have also updated our cash and balance sheet expectations for 2025 with the proceeds of the load water U S royalty monetization combined with cash generated from the business. We now expect between $450 million to $500 million of cash available for debt Paydown. This year as a result, we now anticipate ended the year.
Speaker Change: Net leverage of three nine times to four three times adjusted EBITDA.
Speaker Change: Slide 18 provides a year over year bridges for 2025, adjusted EBITDA and adjusted EPS on Slide 23 in the appendix provides a number of additional assumptions to help support your modeling efforts.
Speaker Change: On slide 19, we provide our financial guidance for the second quarter, we expect organic constant currency revenue growth of 4% to 6% largely driven by the positive momentum in our U S breast health business on a reported basis, we expect $1 175 billion to $1 $195 billion in revenue.
Speaker Change: Our investments in recently launched products continue with a plan approximately 11% year over year increase in operating expenses as we head into the peak parasiticide and allergy season.
Speaker Change: Consequently, we expect adjusted EBITDA of $200 million to $220 million and adjusted EPS of <unk> 17 to 21 sets. These ranges include a minimal impact from tariffs given the timing of their implementation at our mitigating actions, we expected adjusted effective tax rate in Q2 is 25% to 27%.
Jeff Simmons: Now I'll hand, it back to Jeff for closing comments.
Speaker Change: Thanks, Todd we started the year, saying 2025 is about delivering not promising and that's exactly what we're continuing to do a langkow delivered a strong first quarter outperforming our expectations across all key metrics growth is accelerating with revenue guidance being raised and innovation and cash are tracking ahead of.
Speaker Change: Patients. We also continue to accelerate deleveraging reducing debt while investing in launches in key markets. Our organization is engaged energized and well equipped to navigate these dynamic market conditions, our people share my confidence and excitement into the balance of the year truly link is in a position of strength we are.
Speaker Change: <unk> taken a prudent approach and executing our playbook and a dynamic external environment. We have the right teams interventions and actions to keep progressing towards our goals to transform animal care and to deliver lasting value creation for shareholders and for society.
Speaker Change: With that I'll turn it over to Tiffany to moderate the Q&A.
Tiffany Konaga: 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.
Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question simply press Star one again.
Speaker Change: Your first question comes from the line of Jon Block from Stifel. Your line is open.
Jon Block: Great. Thanks, guys good morning.
Speaker Change: So I'd love to hear just a little bit more about the <unk> guidance.
Jon Block: <unk> investments would seem to be dampening the near term EBITDA result.
Jon Block: You talked about 11% in constant currency opex.
Jon Block: Spend by 6% for the full year, if you could just talk about the cadence there and then maybe the leverage going forward.
Jon Block: That spend sort of subside looking forward.
Jon Block: Okay.
Jon Block: Sure John Thanks for the question and yes, we have said from the start we are going to have a no regrets launch approach on our.
Jon Block: Page six blockbusters. So in Q2 at the heart of the North Hemisphere Parasiticide season, and so we are investing.
Speaker Change: Hi, crude oil quadro, it's off to a great start.
Jon Block: Heard in the prepared remarks.
Jon Block: Sales from distribution to vet clinics, we took a 10% share already.
Jon Block: <unk> is resonating with its tick kill quickness, the taper coverage as well as heartworm coverage from month, one. So overall, we're going to be putting a lot of media dollars behind that and that's increasing the spend.
Jon Block: Also in Europe continues to have a nice front doubling year over year in Q1, and part of the timing in Europe. There's a lot of sales in Q1, and then the investment to pull that out to consumers happens in Q2. So there was a little timing mismatch between the revenue and the investment.
Jon Block: Fundamentally given the importance of northern Hemisphere parasiticide season to us, we really think of political on a first half second half basis.
Jon Block: We're over achieved our expectations here in the first half relative to start the year on the back of these investments.
Jon Block: Quadro Ens umbrella, but thats. The case, then we're going to get the lift here in the back half as those investments in Q2 really pay off to drive revenue.
Jon Block: Continued accelerating basis to get to our mid single digit growth for the full year.
Speaker Change: Got it very helpful and maybe just I hate to burn one here, but I just wanted to be really clear so on the tariffs.
Speaker Change: If nothing were to incrementally occur from here you have what $25 million in EBITDA from the FX moves that.
Speaker Change: Not reflected in the guidance, you'll just sort of for now keep that in your back pocket to see how the former exemption plays out.
Jon Block: If you could just talk to that Jeff.
Jon Block: Jeff I'll just try to ask it offshoot to the second part of that question. Some of your awarding arose in <unk> the label change or potential <unk>.
Jon Block: More fulsome or upbeat relative to past. So maybe if you can give a little bit more details there on the potential timing behind that if that were to occur. Thank you.
John: Yes, John Youre reading slide 18 correctly.
John: We've got a $25 million EBITDA tailwind from the weaker dollar we decided not to reflect that and increasing our guidance here in may just given the uncertainty with the pharma exemptions if everything holds.
John: Yes, there would be a 25 million upside from FX on our base business.
John: Puts us close to 900 million of EBITDA by end of the range or 875 at the mid.
Speaker Change: Yes, John and <unk> been really enable a lot of good constructive dialogue as we've said we got two work streams one on the language of the label that's more short term and one on the overall label itself and I would just emphasize yes. We continue to have good dialogue with the FDA. Some of the regulatory changes, we do not see any impact to us <unk>.
Speaker Change: <unk> other reviewers are all in place that dialogue is going forward and on that language change yes. The data has been with the Cvs for some time, we expect an answer it is that on a <unk> type timeline as we get into the second half of this year and again, we stand by the science and we'll continue to work with the CGM on this and I think.
Speaker Change: It also has demonstrated out in the field as I highlighted in my comments the efficacy of Zen rally continues to resonate as we move from 8000 clinics to 11000 clinics were in 35% of the clinics today and then the less restricted markets outside of the U S.
Speaker Change: Ramping really while we're in three key markets. We got three major markets come in in the second half, which will also be part of Todd's point of the increased ramping up revenue in the second half as well so.
Speaker Change: Yes, we're very happy with where we stand today with the CDN and we'll continue to work with them going forward.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Michael Riskin from Bank of America. Your line is open.
Speaker Change: Great. Thanks for taking the question guys and congrats to the strong start to the year I'm going to pick up where we are John just left off on the innovation front.
Speaker Change: And as you sound really positive on all of the innovation updates.
Speaker Change: You talked about then rally that talked about crossroads.
Speaker Change: $198 million in the first quarter is certainly well ahead of where we had you.
Speaker Change: I realize there is some seasonality with some of these products in terms of companion animal in the first half of the year, but still given these are new where you still think they would ramp through the year. So could you just walk us through.
Speaker Change: That and the raising the full year innovation by by $20 million, I think you'd be able to raise even more.
Speaker Change: So just sort of what you saw if you could parse out the jumped at $198 million in the first quarter.
Speaker Change: The thought process for the rest of the year.
Speaker Change: Yes, Thank you Michael and I appreciate the question because I think that's when you look to <unk>. This is what really differentiates US is in my 35 years I've never had a slide like we just showed on six major renovations and another one coming in IL 31. So what I think is maybe been misunderstood in the past or last year.
The basket of the six innovations overall holistically and so what I would tell you is that's what's driving the growth is what we're calling the big six seem to become the big seven.
Todd Young: Major products in major markets that are going to be globalizing with really low cannibalization, we're seeing that play out more so in Q1 than any other quarter and we continue to see it ramping going forward I don't want to get ahead of ourselves we're in launch mode and as Todd said.
Speaker Change: We are in the northern.
Speaker Change: Hemisphere Parasiticide season, and that's key I wouldn't notice a few that I would just highlight and since the last quarter and Thats Portolio quadro to build on some of Tom's comments I mean, we believe one the marketplace continues to get bigger the majority of puppy starts are in this segment, a broad spectrum and desktop so this.
Speaker Change: Is the biggest animal health segment growing the fastest and we believe that this has the potential to be the best product and here are the proof points that I would lean in on so and.
Speaker Change: Because we do think this is the biggest material driver going forward.
Speaker Change: That acceptance to Todd's point at 10% dollar share is ahead of our expectation two thirds of that shift is coming from the competition and new starts and the cannibalization is more favorable than we thought and the second is the differentiation attack had said and I would highlight I think another element of differentiation is coming on.
Speaker Change: Unsolicited.
Speaker Change: Pet owners is the tolerability of the product.
Speaker Change: So we think that is definitely where we're entering new clinics with codelco cuatro, it's helping the total portfolio and we have a special product and codelco Cuatro and we're going to globalize that product as we've said I'll point also to experience we highlighted Michael for the first time, what we believe the size of the market can be for.
Speaker Change: Experience in Canada, and the U S and as we highlighted at 2% to 100% growth and cattle numbers more dose more days.
Speaker Change: A sticky product, that's adding a lot of value right now as cattle numbers are still down and ramping and we will be bringing that product into geo expansion into a couple new markets in the second half of this year as well. So it's the basket of innovation. It's also codelco frame that franchise overall for Codell Leo is another key driver.
Speaker Change: So.
Todd Young: Look we're an execution story and we are going to lean in and we're going to invest pretty significantly on these launches in the second quarter as Todd mentioned driving some of the EBITDA hole.
Speaker Change: Okay.
Speaker Change: I mean, you kind of preempted My second question talking about cross show, but I'll still dig into that.
Speaker Change: That 10% dollar share that really stuck out to us.
Speaker Change: Given we know what severity of trio reported we've got pretty good sense of where Nexstar pluses, that's a pretty impressive <unk>.
Speaker Change: I guess the footnote there is this 10% of clinic sales.
Speaker Change: Versus sort of sell out is there any reason you think that should differ dramatically I guess I'm, just trying to kind of asking how much pre stocking me there have been from vets and that first quarter. Because you would think that that that 10% should just grow over time and that can that can get to a pretty healthy number for the full year.
Speaker Change: Just talk about the encoding versus that clinic sales there. Thanks.
Speaker Change: Michael Youre thinking about it correctly, it's a great start we're getting it onto the shelves of a lot of vet clinics. So that's where we're getting that 10% dollar share from distribution into the vet clinics as we mentioned in the prepared remarks, we feel pretty good we've got pretty lean inventories at the distribution. They had multiple orders during the course of the quarter.
Speaker Change: Now, we're really making these investments we talked about in Q2 to have the consumer is excited about this great product and so with that we do expect to start to get that outbound sales to be growing and taking share with consumers as well, but there is a little bit of a timing there, but we're really.
Speaker Change: Pleased with what Bobby Modi and his team did executing across the U S to launch crude oil in the quarter was a great start.
Speaker Change: Alright, Thanks, a lot will get better.
Speaker Change: Yeah.
Speaker Change: Your next question comes from the line of Andrea Alfonso from UBS. Your line is open.
Andrea Alfonso: Thanks, so much everyone for taking the question.
Andrea Alfonso: I really appreciate all the color that you've provided so far instead of all yet, but just moving a little bit more on what you've seen in the quarter to quarter ramp.
Andrea Alfonso: I'm curious about you discussed rates, but curious about the makeup of order sizes of initial orders versus Reorders and if you could sort of discuss the breadth of activity and uptake for the specialists versus the general debts.
Michael: And if I may build on just sort of the question that Michael just raised.
Michael: Would it would you be able to characterize whether maybe you can rally our quadro is the relatively greater driver of the $20 million increase in innovation revenue expectations. Thanks, So much.
Speaker Change: Yes, I'll take the first one Todd you can you can grab the second one thank you Andrea for the question.
Michael: Look as we look at Centralia.
The first thing we do is we step back and see a market that's going to probably eclipsed $2 billion. It continues to grow beyond what everyone's expecting them into double digit growth market. It's global and we're excited about as an <unk>. We're excited about IL 31 that stay and on track for a late 2025 approval.
Michael: And as you know we've got a few other key assets here in the rest of the decade that we're coming into it. So overall the derm market continues to be robust resilient and continues to grow and we are ramping as we've said the key thing is get into formularies and to lean into these clinics and every month, we have an increased number of <unk>.
Michael: Ex that or using Zen rally.
Michael: And their formulary permanently I think the message is the headline and the buzz in the industry from Brazil, and Japan back to the U S is the efficacy of this product its outstanding efficacy, it's been put into some of the toughest cases, and it's performed and so we are we're ramping up use I think I would point to a couple of statistics.
Michael: And that is that this 26% of events that are not using as we come into the Durham season are expecting to use that's where we're targeting our focus our investments a little bit more on the ground game than in DTC, where we're doing test detects sessions as well as the sampling program is working we're getting good conversion when Pete.
Michael: Sample it when they put dogs on it.
Michael: And then move it into a more of a mainstay product our challenge.
Michael: Is ultimately about moving more clinics from a second line treatment or a tough case treatment to first line treatment and we believe that derm season that we're coming into is really important to remember that we see when.
Michael: When you look at the Durham season.
Michael: Coming into the months, we just come out of the lowest season in July to September there is 25% more volume than it is in the low months. So we've got to lean in here and actually get increased use and most of that investment, though is going to be more in the sampling and detect attack and then we're looking for.
Speaker Change: Continued less restrictive labels and.
Michael: The big market of Europe.
Michael: K in Australia, a 6% to $700 million market outside the U S that will be entering heavily in the biggest markets in the second half of this year.
Michael: Todd.
Todd: On your question of what's driving the raise on innovation, it's really the complete portfolio I mean, I think we've talked a lot here on.
Speaker Change: At the strength, we're seeing in Europe of the growth of crude oil plus outside the U S.
Speaker Change: Throw in experience of continuing adding more and more accountable there.
Speaker Change: <unk> rollout. So overall, we're really pleased with the complete portfolio across the globe.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of brand Invesco is from William Blair. Your line is open.
Speaker Change: Hey, everyone. Thanks for taking the question.
Speaker Change: I wanted to hit on the innovation guidance again, and maybe I can appreciate you typically don't give kind of the revenue buckets, which is fine, but maybe can you just talk to us about like what are the top three.
Speaker Change: Ill take another stab at asking this question.
Speaker Change: What are the top three revenue contributors to that innovation bucket in 2025, just to give investors kind of a little bit of a snippet of what we should be focusing on is the real growth drivers within that segment had a follow up thanks.
Speaker Change: Yes, I mean as a reminder, exterior went over 100 million of last year. It got heifer clearance.
Speaker Change: In November and so if you want the biggest dollar driver I will give you that and Thats experience.
Speaker Change: <unk> seen most of the team here at U S cattle and the team in Canada are really making inroads and we're winning in the U S. Farmer matter. When you can see at 17% growth in Q1. It continues to have great growth last year, adding <unk> to the dairy portfolio.
Speaker Change: That team is really executing well and as the big drivers. So the number one product rather than from a dollar perspective is expiring.
Speaker Change: And then again, we're not going to get into each of the individual ones, but again with the start that crude cuatro has had.
Speaker Change: Capturing more than we expected and that is would it be a big play just given it is the best product on the market. It just kills everything and it kills the fast sustainability. So we believe that's going to be the differentiator really excited for customers to keep getting kudos lots of other docs every dollar lost vehicle.
Speaker Change: Doug.
Speaker Change: I would also say I would also just say another note that I know, we had investor questions a year and a half ago about the base business and I would point to a couple of things that I'd like to see it going a lot in the field. The last three months is innovations in each portfolio are making the base stronger. So we had a good quarter in Europe.
Speaker Change: With Soares don't add tab or excuse me <unk> in the <unk> family because of AD tax remains and continues to do very well because of both their and exterior both in dairy and beef and credential Quadro as I've mentioned has taken 500 clinics and are buying additional ankle products.
Speaker Change: <unk> and other products that have never purchased before so what excites me too as our base is as strong as it's been because our portfolios are getting better because of the innovation I would point to that because that was a common question. We got a lot last year and even earlier than that.
Speaker Change: Yes.
Speaker Change: Great.
Speaker Change: Super helpful and one follow up here quickly.
Speaker Change: This is just a bit hard to gauge and other competitors have been talking about it as well, but just spend a minute on the macro environment. I know you had a little bit of volatility in Q1 is retail and others have seen that too so not overly surprising but expectations on how things are holding up so far on the consumer side of things and expectations on how thats trending and congrats.
Speaker Change: Thanks, guys.
Todd Young: I'll make a couple comments Todd if theres anything else I think I want to emphasize the headline is the lingo is.
Todd Young: An execution story, we're not a pet visit that depended story and I really point to yes, we need to be.
Todd Young: Continuing to look at this as a durable market, but we do need to continue to monitor consumers and spend in the economy, and we're doing that but I would say that given where we stand today with our omnichannel.
Todd Young: Capabilities that we've set up our innovation that we're launching all the stuff that's happening with compliance and drop shipping and all of our <unk>.
Todd Young: Experts that we got from Bayer and our company and the globalization. We're taking those are the things that will drive <unk> going forward and we're quite insulated from a worry of a one or 2% change in a pet visit and we think that all of this leads to our ability to take price, where we can make that some farmers more.
Speaker Change: And continue to have compliance growth I will also highlight one other key trend that I think is important it doesn't get talked about enough just as Todd mentioned on exterior, but as leaders in farm animal.
Speaker Change: Animal protein and this whole, making America and really making the world healthy animal protein is on the uptake and we've seen some initial statistics here as we look at 'twenty four going into 'twenty, five and we're spending a lot of time in the boardrooms of our major protein companies around the world because we see a big opportunity.
Speaker Change: Our industry has just announced a $10 billion U S investment in dairy products because of protein.
Speaker Change: Last year data.
Speaker Change: A record of $104 billion.
Speaker Change: Animal protein here in the U S. While plant based meat saw a 20% decline and on average Americans eight nearly 7% more last year than before the pandemic, so helping our customers with regulatory with pathways for more use with innovation and ultimately what we do making <unk>.
Speaker Change: Teen more valuable and healthy and more abundant and affordable for consumers. That's a trend that I don't think we've pointed to and what excites us about our farm animal business as we go forward.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Chris Scott from Jpmorgan. Your line is open.
Catarina: This is a catarina on for Chris. Thank you so much for taking my questions. So first question is just around tariffs.
Speaker Change: Think about mitigating impact kind of in the medium term do you think there's an ability to offset some of the potential tariff pressure via price increases and do you think that's something that the market can absorb or do you expect any price action to meaningfully impact demand, particularly I guess, what the touch side.
Speaker Change: And then second question is just on <unk> can you remind us how youre thinking about the launch of the product in Europe. So we kind of expect a similar subsequent investment ahead of that launch.
Speaker Change: And then how quickly do you think it can ramp in that geography, and maybe anything you can say on kind of what the European label could look like if you had any discussions with the regulators. Thank you.
Catherine: Sure Catherine.
Catherine: A question on tariffs, we already are taking some price in certain markets. As we said China has been one where we are looking at those inbound tariffs and offsetting some of that impact with price certainly in the U S market, we're looking at that and considering the right way to do that in a value based manner that we remain competitive.
Catherine: And again lots of uncertainty.
Catherine: World with respect to the tariffs what retaliatory tariffs.
Catherine: Look like we do have a global manufacturing footprint.
Catherine: With that puts in some positives in certain markets of negatives in other markets, but overall, that's the benefit of our global diversified portfolio again.
Catherine: Ross both for Pat So it is something we'll pay attention to it.
Catherine: Right now.
Catherine: We're not.
Catherine: Consumers are continuing to take care of their pets, they always do and we fully expect that.
Catherine: Something we're very focused on as a company.
Catherine: And then really just in Europe, and the UK as well as Australia markets that we have submissions and we are in the final stages of regulatory processes of course every country is a little bit different.
Catherine: We're managing in responding to questions along the way we continue to have confidence in a less restrictive label outside of the U S. But we will continue to work closely and monitor that we do have.
Catherine: Our key teams in Europe already trained through the first phase we've got our sales force is right sized following very much a similar playbook as the U S.
Catherine: So we have that all in place and then yes, there'll be a variable costs that will increase as we have in what we're doing right now with that tap will do some of that was then rally as we get into the second half.
Catherine: And expect to launch this product again with no regrets because its a major market international derm is growing as fast or faster than the U S and it's a 6% to $700 million market. We know is in Raleigh, as we watch it in Brazil, Japan, Canada has great potential in these markets.
Catherine: Thank you.
Speaker Change: Your next question comes from the line of Nova <unk> from BNP Paribas. Your line is open.
Speaker Change: Hi, good morning.
Speaker Change: I had a quick one on the I'm sorry on the U S retail environment.
Speaker Change: The latest indicators from U S retail environment.
Speaker Change: Good drivers in addition to the cold weather.
Speaker Change: Challenging U S retail environment for airline co in January February and also if you.
Speaker Change: You can discuss what's the scene in terms of positive trends in March and April for your franchisees.
Speaker Change: Yes, I think the key.
Speaker Change: The difference there as well as we're speaking to the retail Rx market Chewy Amazon is just kind of looked at retail.
Speaker Change: It's really about driving auto ship driving compliance and we're seeing really great success. There are a lot of Gallup ranked goes through that is it just.
Speaker Change: If you can get your product continuous and so that part very strong our focus in the over the counter market, where it doesn't have any products is a little different as it is much more consumer driven a lot of the cold weather foot traffic down.
Speaker Change: <unk> indicated what we showed down 21% for those products.
Speaker Change: The first two months here, but then rebounded in March rebounding in April. So overall, we feel like that is better.
Speaker Change: We're going to be.
Speaker Change: Double digit sort of growth area, because we need to bring innovation there, but it is a consistent player are very high margin product that provides a lot of cash flow for us and so.
Speaker Change: Good about what the team is doing to execute and feel like we've gotten out of the cold weather.
Speaker Change: The rest of the callers will be getting purchased.
Speaker Change: Please <unk> across the U S and Europe I'll build on two Theres a lot of buzz about Amazon and just to highlight our strategy doesn't change.
Speaker Change: We're centered on physical availability, we picked up in the first quarter 48000, more distribution points, which we brought this capability in from Bayer we built on it with a lot of new expertise, we've got players Snyder out in California, and many others that we brought in from the CPG industry and Amazon has.
Speaker Change: Is one of the largest customers for <unk> because of our pet retail business, so as they get into Rx.
Speaker Change: It is a platform that requires unique capabilities and we're familiar with those we work with them every day and.
Speaker Change: We look forward to expanding into the Rx business with Amazon. Ultimately this is all about serving veterinarians and pet owners, giving them the products they want where they want to shop at the price points. They want to shop at and we've got the best portfolio and global path to do that.
Speaker Change: Thank you that's very helpful and maybe a follow up on pricing if you could discuss price.
Speaker Change: For the year.
Speaker Change: Yes, we continue to expect about 2% price for the full year, that's across the total global business and obviously it varies between different areas of the business globally.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Michael <unk> from Evercore ISI. Your line is open.
Michael: Hey, guys. Thanks, so much for taking my question and congrats on such a strong launch to the year two for me I just want to revisit.
Speaker Change: Label.
Speaker Change: Change requests it seems like it's progressing quicker than initially expected.
Speaker Change: Do you still view this requested change potentially taken a few years to materialize.
Speaker Change: So if you could comment on and give any color on vets willingness.
Speaker Change: To use first line I know, it's been a short while but.
Speaker Change: Given the progress has there been any change.
Speaker Change: And their willingness to use first line based on what Youre hearing in the field and I have a follow up. Thank you, yes, Michael So just very for clarity nothing's changed we've had a two stream approach where the CDM and working with them. One is on the language changes that are maybe more moderate to the label today, which.
Speaker Change: We believe us.
Speaker Change: Important we submitted the data that's on an <unk> type timeline and those timelines we started doing that immediately as soon as we got the response on the first label and that work stream is all progressing and again, we should have an answer to that in the second half of the year. The other one is we've started dogs on a larger trial.
Speaker Change: That would be more of a full bigger label change and that's going to take much longer that's going to be as we've said beyond definitely one year, maybe closer to two years, but what we're seeing with the product. It is a good investment to do for the longevity of the product overall and Mike one of the reasons it takes longer because I know we got.
Speaker Change: This discussion or conferences, we have to have a one year old puppies butter vaccinated and healthy to do the trial. So you can't do it in the air because you don't have one year old puppies and so you've got at least a year and so that's why it takes a longer time to do the clinical work on the add backs moved those pits.
Speaker Change: Then your second question, absolutely we are seeing a nice ramp as I mentioned theres more veterinarians every month that are getting comfortable to bring Zen rally in to first line or what I would call into their formulary to say hey, its option, a b or C and we're in that.
Speaker Change: We're in that portfolio of options, but we want more and that's really the two big drivers to get veterinarians comfortable or other veterinarians and key opinion leaders visiting with them sharing the data spending time with them in a tech detect dialogue and then followed with a sampling program where <unk> can try.
Speaker Change: This in different cases, and those are the two lead indicators you combine that with the derm season, that's coming we believe we will continue to see more of that move this to a first line treatment.
Speaker Change: The efficacy at the prevailing narrative out there in the industry right now and how wells then rally is doing in all cases in all situations.
Speaker Change: Got it and then just my quick follow up just on Xperia just noticed that based on the USDA AG data catalog feed is seem to be below last year's levels, but again experienced seems to be a significant growth driver.
Speaker Change: Maybe you can explain this discrepancy and add any color on less.
Speaker Change: <unk> cattle on feed but expire performing so strongly.
Speaker Change: It's really the market position my academic spirit continues just to be so.
Speaker Change: Important too that these lot of owner in the economics for them and as a reminder, we added the heifer clearance and so that's a big driver of the uplift that was 40% of the cattle and so yes.
Speaker Change: We've got low catalog piece, that's going to be a tailwind when that reverses as part of the capital cycle in the years to come so.
Speaker Change: It really is that expanded market from heifers that helps us offset the lower catalog the numbers from a year ago, while <unk> continued to ramp.
Speaker Change: Great. Thanks, so much.
Speaker Change: And your final question comes from the line of Erin Wright from Morgan Stanley. Your line is open.
Erin Wright: Great. Thanks for squeezing me in here.
Speaker Change: On distributor stocking, we typically see parasiticide stocky.
Speaker Change: That typically happens in the March timeframe, sometimes it's looked warranty equal I guess you called out the acceleration in March and April.
Speaker Change: Have a new product with Guangzhou, presumably there was initial stocking there just because it's a new product around and then I guess can you talk through some of the moving pieces in terms of the stocking destocking dynamics in pet health and Mike.
Speaker Change: Sir can you quantify any sort of initial talking I guess from a macro perspective.
Speaker Change: Yes.
Speaker Change: Stocking issue was last year, when we put the bear products into distribution with.
Speaker Change: The U S. But also business would have been up 8% in the quarter.
Erin Wright: I don't really think of it as a lot of stocking erinn when the distributors.
Erin Wright: <unk> multiple times and I don't think in Q1 of next year, we're going to be calling out that we're having to cover an initial stocking.
Erin Wright: Really one of the really quick.
Erin Wright: To that as we've said getting 10% of sales out too that's from distribution.
Erin Wright: The distributors, we have reduced staffing as the initial orders werent nearly good enough.
Erin Wright: Fill the demand that they were getting from the vet products as our restaurant, they're really pulling that through so I think very little in the stocking dynamics.
Erin Wright: It'll be proof.
Erin Wright: A year from now when we're not calling out a stocking headwind on a year over year basis.
Erin Wright: Okay, Okay, great wanted to clarify that.
Erin Wright: And I guess outside of innovation driver barrier I guess can you just speak to the underlying house.
Erin Wright: Our livestock market and how we should think about the quarterly progression from here on that business.
Erin Wright: Yes, I think overall, if you look at Erin good good question I think.
Erin Wright: The headlines really as we just highlighted the cattle market that matters. Most we landfill beef confined feed you've got low supply high demand good economics overall.
Erin Wright: On the poultry side, the global strength continues the global numbers from Robalo and others. As you see are two 5% to 3% growth, we click along at that.
Erin Wright: Poultry rotations inside of that that can impact quarter to quarter, but as a whole we continue to take share we continue to innovate and the global poultry business is pretty resilient, there's talks of tariffs, but I think because it's so global it's pretty insulated overall, and then swine where were really more North America, China based.
Erin Wright: Improved pricing as expected balanced overall, so we see a stable market with a portfolio that can win within that stable market with the tailwind.
Erin Wright: And the buzz in the boardrooms right now in protein is the opportunity in protein right now Ken can be really positive and we're supportive of the administration and how we can continue to make animal protein in the center of this hole.
Erin Wright: <unk> movement and diet movement, which is really sustainable healthcare is it all starts with what you eat and I think it's a real opportunity so.
Erin Wright: So those are those are the trends, we see overall pretty pretty stable, yeah, just specifically on Alanco international headwinds here in Q1.
Erin Wright: Couple of points on the international growth and farm animal from a textile recall from a year ago as well as our exiting certain other lower margin countries and so that team Ramiro Cabral in his organization is really executing well and I expect that will help the growth acceleration, we will see in Q2, as we go up 4% to 6%.
Erin Wright: Constant currency growth of 4% in Q1.
Erin Wright: Okay. Let me just make a couple of quick closing comments. Thank you for your time.
Erin Wright: We're entering no question, a much awaited period of sustained growth and accelerated value creation, we're an execution story.
Erin Wright: The entire organization is focused on our three drivers of value growth innovation cash in Q1 was one of the highest quality quarters. We've had in many years growth accelerating and we will continue to accelerate the base and innovation innovation as a whole basket as we just talked about of innovation and we're raising our guide because of the diversity of that.
Erin Wright: Innovation in major markets and the whole company is really focused on cash and margins, we had our best quarter in a long time with manufacturing there is a lot of momentum in our manufacturing organization driving margins and it's exciting to see our cash to debt go from 150 to now $4 50 to 500 and I really.
Erin Wright: Want to emphasize tariffs we've taken a prudent approach on the current state and really any future scenario. We see is inside our guidance to make that clear for you and and the positive tailwind of FX is going to be helpful. So thanks to our customers that's farmers and pet owners for our time the relationship.
Erin Wright: We are all about creating value for you and thank you to our investors. We do believe we have a compelling value proposition and we're going to continue to execute against growth innovation and cash and create a whole lot of value for yourselves. Thanks for your time, we look forward to engaging with you here in Q2.
Erin Wright: This concludes today's conference call. Thank you for your participation.