Q2 2026 Elanco Animal Health Inc Earnings Call

August 5, 2026

Speaker #1: Good day, and thank you for standing by. Welcome to the Elanco Animal Health Reports second quarter 2026 results conference call. At this time, all participants are on a listen-only mode.

Operator: Good day, and thank you for standing by. Welcome to the Elanco Animal Health report Q2 2026 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. 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.

Speaker #1: raised. To withdraw your question, please today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tiffany Kanada, Vice President of Investor Relations and ESG.

Speaker #1: Please go ahead.

Speaker #2: Good morning. Thank you for joining us for Elanco Animal Health second quarter 2026 earnings call. I'm Tiffany Kanaga, Vice President of Investor Relations and ESG.

Tiffany Kanaga: Good morning. Thank you for joining us for Elanco Animal Health Q2 2026 earnings call. I am 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 Van Himbergen, 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 forecasts. 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 statements. Our remarks today will focus on our non-GAAP financial measures.

Speaker #2: Joining me on today's call are Jeff Simmons, our President and Chief Executive Officer; and Beth Haney from Investor Relations. The slides referenced during this call are available on the Investor Relations section of elanco.com.

Speaker #2: Today's discussion will include forward-looking Officer; Bob VanHimbergen, our 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 #2: 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.

Speaker #2: We do not undertake any duty to update any forward-looking statements. 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.

Tiffany Kanaga: 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.

Speaker #2: References to organic performance represent revenue growth excluding the impacts from royalty revenue that was sold to a third party, foreign exchange rates, and acquisitions and divestitures.

Speaker #2: With that, our prepared remarks are concluded. We will be happy to take your questions. I will now turn the call over to Jeff.

Speaker #3: 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.

Jeff Simmons: Thanks, Tiffany. Good morning, everyone. Elanco's Q2 results demonstrate our momentum and leadership in the attractive, durable animal health industry. I would like to thank the global Elanco team for their disciplined execution and once again delivering on our commitments. As highlighted on slide four, 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 US pet health and US 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 omni-channel approach provide a strategic advantage with commercial execution across species and geographies. In the US pet health, we continue to achieve share gains across all four major categories: derm, para, osteoarthritis pain, and vaccines.

Speaker #3: As highlighted on slide 4, we achieved 8% organic constant currency revenue growth, outperforming the high end of guidance for After revenue, adjusted EBITDA, and adjusted EPS, allowing us to, once again, raise our guidance for the year.

Speaker #3: Growth was led by U.S. Pet Health and U.S. Farm Animal, each up 11%, followed by International Pet Health, up 9%. We saw strong contributions from both price and volume.

Speaker #3: 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 four major categories, derm, para, osteoarthritis pain, and vaccines.

Speaker #3: Xenrelia, our newest blockbuster after reaching that milestone in July, was the largest contributor to second quarter total Elanco growth, closely followed by Cordelio Quattro.

Jeff Simmons: Zenrelia, our newest blockbuster after reaching that milestone in July, was the largest contributor to Q2 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 US, we grew nicely in international, and saw global ruminants up 17% on a reported basis. Our Big Six, led by Zenrelia and Quattro, helped drive $340 million of Q2 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 Six, we are raising our full-year innovation revenue target to $1.25 billion.

Speaker #3: In farm animal, which accounts for the other half of Elanco revenues, we added to our leading position in the U.S., grew nicely internationally, and saw global ruminants up 17% on a reported basis.

Speaker #3: Our big six, led by Xenrelia 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.

Speaker #3: With significant runway ahead for the Big Six, we are raising our full-year innovation revenue target to $1.25 billion. Our robust top-line growth, alongside faster-than-expected margin expansion and working capital discipline, has driven down our net leverage ratio more rapidly than planned.

Jeff Simmons: 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 3x to 3.2x previously. With our solid H1 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.

Speaker #3: We are improving our year-end net leverage target to approximately three times down from a range of 3 to 3.2 times previously. With our solid first half performance and business momentum, we are raising our top and bottom-line full-year outlook.

Speaker #3: We now expect organic constant currency growth of 6 to 7%, adjusted EBITDA of 1.01 billion to 1.035 billion dollars, representing 13% growth at the midpoint, and adjusted EPS of $1.10 to $1.16, representing 20% growth at the midpoint.

Speaker #3: 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.

Speaker #3: 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.

Jeff Simmons: While there has been much focus on US vet visit volumes, we have consistently demonstrated that innovation and omni-channel leadership can drive strong growth in the US 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 omni-channel 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 US pet health industry up mid-single digits for the trailing four quarters through Q1, with resilient pet owner spend and rational pricing.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: pet health industry up mid-single digits for the trailing four quarters through Q1. With resilient pet owner spend and rational pricing, in summary, Elanco's growing even faster through our comprehensive portfolio of differentiated innovative products and omnichannel execution.

Jeff Simmons: In summary, Elanco's growing even faster through our comprehensive portfolio of differentiated innovative products and omni-channel 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 Q2 revenue performance on slide five, we break down the 8% underlying organic constant currency revenue growth. Our recently closed acquisition, AHV International, contributed about a half a point of growth not included in the organic rate, building on our global ruminant success. US 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.

Speaker #3: 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.

Speaker #3: Our recently closed acquisition, HV International, contributed about half a point of growth—not included in the organic rate—building on our global ruminant success.

Speaker #3: 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.

Speaker #3: In the clinic, we achieved robust double-digit growth with our basket of innovation, led by Xenrelia and Quattro, outperforming on top of a stable base.

Speaker #3: And the new launch has also benefited the greater portfolio, including vaccines and pain. At retail, our OTC parasiticide portfolio performed well, building on our leadership position.

Jeff Simmons: 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 US and separately international pet health, where it is quickly capturing share in the $850 million international derm market. US farm animal increased 11% in the quarter with continued growth across all species.

Speaker #3: Seresto and the advantage family both experienced good consumption growth and a mature market, reflecting strong trends for our products and supported by expanded in-store availability with Costco and Dollar General as new customers.

Speaker #3: Additionally, while building off a small base, Xenrelia and Quattro are growing rapidly in alternative channels. Moving to International Pet Health, we delivered 9% organic constant-currency revenue growth, driven by Xenrelia ADTAB and Cordelio.

Speaker #3: While Xenrelia 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 dollar international derm market.

Speaker #3: 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.

Jeff Simmons: 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 six, 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.

Speaker #3: 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.

Speaker #3: Turning to slide 6, we delivered 340 million dollars of innovation revenue in the second quarter. With growth across all of the big six, our broader basket of innovation outperformed expectations.

Speaker #3: As a result, we are raising our anticipated innovation contribution for 2026 by another 50 million dollars, to approximately $1.25 billion dollars, reflecting many large products growing and gaining share in key growing global markets.

Speaker #3: Let's further discuss the progress of our major innovation products on slide 7, starting with our newest blockbuster, Xenrelia. With over 2.5 million dogs now treated, Xenrelia's growth trajectory both in the U.S.

Jeff Simmons: Let's further discuss the progress of our major innovation products on slide seven, starting with our newest blockbuster, Zenrelia. With over two and a half million dogs now treated, Zenrelia's growth trajectory, both in the US 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 US 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 US JAK market share improved 9 points year-on-year and also gained versus Q1, reflecting these new purchasers.

Speaker #3: and internationally has accelerated further, and continues to surpass our expectations. With rapid share gains in the 2.2 billion dollar and growing global dermatology market.

Speaker #3: Xenrelia's momentum is driven by its strong efficacy differentiation. June was Xenrelia's largest month yet, despite new competition in the quarter, with U.S. penetration climbing to approximately 18,000 vet clinics.

Speaker #3: That's greater than 60% of the total clinic base, with a reorder rate maintained at over 80%. Our U.S. jack market share improved 9 points year on year, and also gained versus Q1, reflecting these new purchasers.

Jeff Simmons: 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 US, 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 number 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.

Speaker #3: Importantly, we are seeing increasing use of first-line treatment, now to over 40% of users, demonstrating growing belief that Xenrelia is the first choice for derm treatment for many veterinarians.

Speaker #3: Outside the U.S., Xenrelia is now in 47 countries, all without label restrictions. We continue to drive significant share gains across key geographies. For example, Xenrelia has built on its market-leading position in Brazil and gained number one JAK status now in France.

Speaker #3: In Europe, we continue to outperform the competitive entrant, with jack market share as high as 40% plus. As we've previously shared, Xenrelia performed well, and a head-to-head study against the market incumbent.

Speaker #3: 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.

Speaker #3: The results reflect our real-world experience that Xenrelia's efficacy is a game changer. On to our second derm innovation, Befrena, which we launched in May ahead of the allergy season.

Jeff Simmons: 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 US 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. On Credelio Quattro. We are excited by further acceleration of dollar share gains and broad-spectrum dispensing sales from US clinics. Quattro's market share increased 4 points in Q2 on top of the 3 points in Q1.

Speaker #3: The commercial product has shipped to approximately 1,400 U.S. clinics, with strong early feedback. We are ramping up capacity to meet higher customer demand that has doubled the size of our expectations, with weekly increases in supply.

Speaker #3: Given the robust demand, we anticipate supply reaching unconstrained levels in early 2027. A phased launch is typical for monoclonal antibody, or MAB, products, given the anticipated manufacturing ramp-up.

Speaker #3: Overall, we're pleased with Befrena's very early momentum and ability to increase our competitiveness, especially with corporates. Next, on Cordelio Quattro, we are excited by further acceleration of dollar share gains and broad-spectrum dispensing sales, from U.S.

Speaker #3: clinics. Quattro's market we scale our bioreactors with the points in Q1. We rapidly expanded the number of clinics that carry Quattro to over half of the U.S.

Jeff Simmons: We rapidly expanded the number of clinics that carry Quattro to over half of the US 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 four 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, blacklegged 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 blacklegged tick kill than the leading competitors.

Speaker #3: 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.

Speaker #3: Helping veterinarians and pet owners gain appreciation for the four 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.

Speaker #3: 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.

Speaker #3: This combines with Quattro's first FDA conditional approval for the treatment of new world screwworm in dogs. All to represent powerful examples of lifecycle management to build on our differentiation.

Jeff Simmons: This combines with Quattro's first FDA conditional approval for the treatment of new world screw worm 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 Kinetic 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.

Speaker #3: Like Xenrelia, 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.

Speaker #3: Our targeted media approach and industry-leading position with reps and distributors differentiate Elenco 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.

Speaker #3: We continue to track kinetics puppy index as an important leading indicator, where Quattro ranks highest versus other broad-spectrum index. Globally, we are confident Quattro can lead the Cordelio family to become our largest product family ever.

Speaker #3: So far this year, Quattro has launched in Australia, Canada, and Japan. The EU and the UK are next in the nearly $800 million international broad-spectrum market, which is growing double digits.

Jeff Simmons: Far this year, Quattro was launched in Australia, Canada, and Japan. The EU and the UK 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 US 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.

Speaker #3: 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 Act-O category in Europe, with success also supported by data-driven, high-return DTC investments.

Speaker #3: Moving to farm animal, Experia 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.

Speaker #3: farm animal results. We expect Experia to continue to grow and provide portfolio synergies, with multiple levers from extending days of use continued adoption and price.

Speaker #3: However, we anticipate moderating growth rates against challenging comparisons. Lastly, on Bovaire, 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 count numbers.

Jeff Simmons: 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 count 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 eight, we provide recent highlights across the three 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 five to six blockbuster potential innovations expected through 2031.

Speaker #3: Bovaire 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.

Speaker #3: 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 three parts of our consistent IPP strategy, innovation portfolio, and productivity.

Speaker #3: 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 five to six blockbuster potential innovations expected through 2031.

Speaker #3: Alan 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.

Jeff Simmons: 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. 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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 H, V, and FX.

Jeff Simmons: 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 HB and FX. Our pet health launches are powering growth with US corporate account sales, adding 300 new corporate clinics with year-to-date sales ahead of total US pet health. Innovation's 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 3.1 times net leverage in Q2, we are now approaching the under three times landmark, enabling greater capital allocation flexibility.

Speaker #3: 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.

Speaker #3: Innovations also driving pricing gains up 2% in Q2 for total Elenco. We are on track for full year acceleration from 2025, including a back half step up from customer mix.

Speaker #3: Finally, we continue to pay down debt faster than planned and strengthen our balance sheet. At 3.1 times net leverage in Q2, we are now approaching the under 3 times landmark, enabling greater capital allocation flexibility.

Speaker #3: This opportunity has enabled by productivity gains with gross margin expansion and a second quarter up 80 basis points. And Elenco Ascend on track to drive meaningful efficiencies and margin improvement in 2026 and beyond.

Jeff Simmons: This opportunity is enabled by productivity gains with gross margin expansion in Q2, up 80 basis points, and Elanco Ascend on track to drive meaningful efficiencies and margin improvement in 2026 and beyond. I firmly believe we're at 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 Q2 results and financial guidance.

Speaker #3: I firmly believe we're at just the start of the next era of value creation for Elenco, as our consistent execution along with growth, innovation, and cash will add to our momentum and leadership in animal health.

Speaker #3: With that, I'll pass it to Bob to provide more on the second quarter results and financial guidance.

Speaker #1: Thank you, Jeff. 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.

Robert VanHimbergen: Thank you, Jeff, and good morning, everyone. My comments today will focus on our adjusted results for Q2. 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 four quadrants of our business. Total Pet Health revenue grew 11% in organic constant currency. Our US business increased 11%, with strong momentum in both vet and retail channels. Performance was led by strong demand for our 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.

Bob VanHimbergen: Thank you, Jeff, and good morning, everyone. My comments today will focus on our adjusted results for Q2. 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 four quadrants of our business. Total Pet Health revenue grew 11% in organic constant currency. Our US business increased 11%, with strong momentum in both vet and retail channels. Performance was led by strong demand for our 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.

Speaker #1: Starting on slide 10, we delivered 1.368 billion dollars in revenue, up 10% on reported basis. Organic constant currency revenue grew 8%, driven by a 6% increase in volume and a 2% contribution from price.

Speaker #1: Slide 11 provides revenue from the four 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.

Speaker #1: Performance was led by strong demand for our innovation, specifically Zenrelia and Cordelia 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.

Speaker #1: Our farm animal business delivered 5% growth in organic constant currency, in the U.S. organic revenue increased 11%, reflecting broad strength across all three species.

Robert VanHimbergen: Our farm animal business delivered 5% growth in organic constant currency. In the US, organic revenue increased 11%, reflecting broad strength across all three 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. 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.

Bob VanHimbergen: Our farm animal business delivered 5% growth in organic constant currency. In the US, organic revenue increased 11%, reflecting broad strength across all three 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. 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.

Speaker #1: Beef cattle led the quarter, supported by Experia. 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.

Speaker #1: 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.

Speaker #1: And 80 basis point improvement versus the same period last year. The outperformance was driven by a favorable product mix benefit and Elenco Ascend acceleration that more than offset the anticipated inventory cost pressures.

Speaker #1: 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 Elenco Ascend.

Robert VanHimbergen: Looking ahead to H2, we are well-positioned for continued margin expansion, supported by the sustained momentum of our US 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.

Bob VanHimbergen: Looking ahead to H2, we are well-positioned for continued margin expansion, supported by the sustained momentum of our US 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.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: Consistent with our adjusted EBITDA year-over-year comparison for the quarter. Adjusted EBITDA was $288 million. An increase of $50 million or 21%. Adjusted EPS was $34 cents, a 31% increase year-over-year.

Speaker #1: Slide 14 highlights our ongoing commitment to the balance sheet discipline. Our strong operational performance and a decrease of approximately $90 million of net debt have resulted in a half-turn reduction in leverage since the start of the year.

Robert VanHimbergen: Our strong operational performance, a decrease of approximately $90 million of net debt have resulted in a half-turn reduction in leverage since the start of the year. We are closing in on our target of sub three times next year. This is a key milestone that will unlock greater capital allocation flexibility as we pursue our long-term target of two to two and a half times. Moving on to financial guidance starting on slide 16. Our strong Q2 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%.

Bob VanHimbergen: Our strong operational performance, a decrease of approximately $90 million of net debt have resulted in a half-turn reduction in leverage since the start of the year. We are closing in on our target of sub three times next year. This is a key milestone that will unlock greater capital allocation flexibility as we pursue our long-term target of two to two and a half times. Moving on to financial guidance starting on slide 16. Our strong Q2 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%.

Speaker #1: We are closing in on our target of sub-3 times next year. This is a key milestone that will, unlike greater capital allocation flexibility, as we pursue our long-term target of 2 to 2 and a half times.

Speaker #1: 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.

Speaker #1: 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%.

Speaker #1: We expect revenue 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.

Robert VanHimbergen: 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 H1. Additionally, our recent acquisition of AHV International is expected to contribute approximately one 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 three times by year-end.

Bob VanHimbergen: 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 H1. Additionally, our recent acquisition of AHV International is expected to contribute approximately one 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 three times by year-end.

Speaker #1: 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 dollars to 13% growth at the midpoint, capturing our quarterly beat and approximately $6 million of incremental investment in our innovative launches.

Speaker #1: For adjusted EPS, we are raising our guidance by 7 cents at the midpoint, bringing the new range to $1.10 to $1.16, up 20% at the midpoint.

Speaker #1: Finally, we updated year-end cash and balance sheet expectations and now anticipate a net leverage ratio of approximately 3 times by year-end. Turning to slide 18, you will see the primary drivers within our guidance ranges are unchanged from our previous update.

Robert VanHimbergen: Turning to slide 18, you will see the primary drivers within our guidance ranges are unchanged from our previous update. Our guidance reflects the balanced view of the competitive external environment and growth opportunities within our portfolio and Elanco Ascend, our multi-year 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 four 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.

Bob VanHimbergen: Turning to slide 18, you will see the primary drivers within our guidance ranges are unchanged from our previous update. Our guidance reflects the balanced view of the competitive external environment and growth opportunities within our portfolio and Elanco Ascend, our multi-year 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 four 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.

Speaker #1: Our guidance reflects a balanced view of the competitive external environment and growth opportunities within our portfolio and Elanco Ascend, our multi-year productivity and cost savings agenda.

Speaker #1: Now let's discuss Elanco Ascend. Since launching at the start of the year, we have outpaced our initial milestones as we work toward delivering $200 million to $250 million in total adjusted EBITDA savings by 2030.

Speaker #1: That of inflation and program reinvestment. We built Elenco Ascend on four strategic pillars: procurement, price, organizational optimization, and automation. Last quarter, I shared an update on our AI-driven automation progress.

Speaker #1: 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 Six innovation, which directly improves our margins and strengthens our supply chain resilience.

Robert VanHimbergen: 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 $1.220 billion in revenue, representing organic constant currency revenue growth of 5% to 7%.

Bob VanHimbergen: 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 $1.220 billion in revenue, representing organic constant currency revenue growth of 5% to 7%.

Speaker #1: 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.

Speaker #1: 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%.

Speaker #1: 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 and adjusted EPS of $0.19 to $0.22.

Robert VanHimbergen: 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 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 H2 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.

Bob VanHimbergen: 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 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 H2 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.

Speaker #1: 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.

Speaker #1: We are confident in driving high single-digit to low double-digit growth despite challenging comparisons, driven by strong momentum for Zinrelia and Cordelia Quattro, contributions from Befrena, and significant corporate account growth.

Speaker #1: 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.

Speaker #2: Thanks, Bob. Elenco 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 Elenco's long-term opportunity.

Jeff 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 three broader US pet health industry questions that we have heard. Have prices, the consumer, and the market remained durable? The answer all around is yes, with many proof points highlighted on this slide. The US 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 the holistic omni-channel view, the industry is well-positioned for continued growth in 2026. Vet channel revenue is up low single digits year to date.

Speaker #2: As I close, on slide 21, let me address the three broader U.S. pet health industry questions that we have heard. Have prices to the consumer and the market remained durable?

Speaker #2: 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.

Speaker #2: After a weather-related speed bump in early 2026, we've seen a strong market rebound starting in March, also evident in Elenco's results. Across the holistic omnichannel view, the industry is well positioned for continued growth in 2026.

Speaker #2: Vet channel revenue is up low-single digits year-to-date. We see solid consumption trends at retail, with the OTC flea and tick category up more than 4% year-to-date, and alternative channel prescriptions growing very rapidly.

Jeff Simmons: 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, 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.

Speaker #2: 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.

Speaker #2: 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 included in 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.

Speaker #2: 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.

Speaker #2: 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.

Jeff Simmons: 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 US market in five years. Price accelerated in Q2 in our US 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 US pet health market is just a third 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.

Speaker #2: In fact, at the start of 2026, our innovation allowed us to implement our largest price increase in the U.S. market in five years. Pricing accelerated in Q2, and our U.S.

Speaker #2: 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.

Speaker #2: The U.S. pet health market is just a third 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 dollars in annual revenue into the next decade.

Speaker #2: Driven by a fundamental increase in global protein consumptions, 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.

Jeff Simmons: 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 four 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 three years. Importantly, our growth is not dependent on a single product or two. Meaningful differentiation is driving share gains in large growing markets, with globalization largely just beginning. Second, innovation.

Speaker #2: 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.

Speaker #2: Keep innovating, keep delivering, keep making life better for animals. Elenco has four key drivers of value creation through the rest of the decade, providing a compelling investment opportunity.

Speaker #2: First, growth. We have consistent growth across businesses and geography. The big six offer significant runway ahead, expected to double in size over the next three years.

Speaker #2: Importantly, our growth is not dependent on a single product or two. Meaningful differentiation is driving share gains and large growing markets, with globalization largely just beginning.

Speaker #2: Second, innovation. We have increased confidence in our robust pipeline that is progressing without attrition since our December investor day, on track to provide five to six blockbuster potential innovations by 2031.

Jeff Simmons: We have increased confidence in our robust pipeline that is progressing without attrition since our December investor day, on track to provide five to six 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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 a 75-basis-point year-over-year improvement, including 50 basis points of gross margin benefit.

Speaker #2: This expansion is happening while we're also driving strategic DTC investments to accelerate market share gains. And we're just getting started. Elenco Ascend is gaining traction faster than anticipated, driving strong early results and becoming embedded in our culture.

Jeff Simmons: This expansion is happening while we're also driving strategic DTC investments to accelerate market share gains. 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 a 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 US 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.

Speaker #2: 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, Elenco's profile is purposely balanced to align with an evolving growing industry.

Speaker #2: We have diverse exposure split between farm animal and pet health and U.S. and international. We have a pet health leadership and retail and vet clinic innovation.

Speaker #2: 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 to create long-term value for our customers, communities, and you—our shareholders.

Jeff Simmons: 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.

Speaker #2: With that, I'll turn it over to Tiffany to moderate the Q&A.

Speaker #1: 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.

Tiffany Kanaga: Thanks, Jeff. We'd like to take questions from as many callers as possible. We ask that you limit yourself to one question and one follow-up. Operator, please provide the instructions for the Q&A session. We'll take the first caller.

Speaker #1: Operator, please provide the instructions for the Q&A session, and then we'll take the first caller.

Speaker #3: As a reminder, to ask a question, please press star 11 on your telephone. And wait for your name to be announced. To withdraw your question, please press star 11 again.

Operator: As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from Glen Santangelo with Barclays. Your line is open.

Speaker #3: In the interest of time, we ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster.

Speaker #3: Our first question comes from Glenn Santangela. With Barclays, your line is open.

Speaker #4: Yeah, good morning. And thanks for taking my question. Hey, Jeff, I just want to start out talking about your prepared remarks that you specifically called out Zinrelli and Quattro as being the biggest contributors to growth.

Glen Santangelo: Yeah, good morning, and thanks for taking my question. Hey, 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. My question is really on the pricing environment around those drugs. You've commented, or the company's commented several times about price increases across the portfolio being greater in 2026 versus the past couple of years. 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? 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 H1 of the year versus your expectations for the H2.

Speaker #4: And my question is really on the pricing environment around those drugs. You've commented or the company's commented several times about price increases across the portfolio being greater in 2026 versus the past couple of years.

Speaker #4: 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?

Speaker #4: 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 half.

Speaker #4: 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.

Glen Santangelo: 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 H2. You have obviously more conservative expectations. Maybe there's some seasonality and some other investments in there that I'm not thinking about, I'll stop there. Thanks so much.

Speaker #4: You have obviously more conservative expectations. Maybe there's some seasonality in some other investments in there that I'm not thinking about. And I'll stop there.

Speaker #4: Thanks so much.

Speaker #2: Thanks, Glenn, for the question. I will point to slide 21 just on the three common themes we've heard and why we wanted to really put up some key data points.

Jeff Simmons: Thanks, Glen, for the question. I will point to slide 21 just on the three common themes we've heard and why we wanted to really put up some key data points. We continue to see industry growth, a resilient pet owner, and durable price. Let me double down on price in your question. Look, we see a marketplace that's remained responsible on pricing. Again, with portfolio value and differentiation, you can take price. It's why the industry's 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 two 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.

Speaker #2: 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.

Speaker #2: Again, with portfolio value and differentiation, you can take price. That's why the industry is seeing 2% plus over 30 years. We're seeing no change.

Speaker #2: If anything, in Q2, we've probably been more responsible. I'll point to just in the last two 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.

Speaker #2: 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.

Jeff Simmons: I would say specifically in derm and the broad-spectrum parasiticides, we're seeing strong double-digit outside the US grow. In the US, 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. Overall, we're seeing price acceleration in our US pet health from Q1 to Q2, and we'll continue to accelerate in H2. Where I see competition is there's different plays relative to spend to get share. Spend is going up to get share, and our share of voice and our competitiveness has increased. We've added competitive reps, multimedia, and more importantly, distribution's kind of on our side, where we've seen some competition actually play margin and decrease and restructure and cut reps. I think our competitive position is stronger, price remains responsible, and the markets are very durable.

Speaker #2: 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.

Speaker #2: So overall, we're seeing price acceleration in our U.S. pet health from Q1 to Q2, and we'll continue to accelerate in the second half. Where I see competition is there's different plays relative to spend to get shares, spend is going up to get share, and we actually are share a voice in our competitiveness has increased.

Speaker #2: We've added competitive reps, multimedia, and more importantly, distributions, kind of on our side, where we've seen some competition actually play margin and decrease and restructure and cut reps.

Speaker #2: So I think our competitive position is stronger. Price remains responsible, and the markets are very durable.

Speaker #5: Yeah, maybe I would just add a couple of points to that. And then, Glenn, I'll get to your second question. But pricing the quarter, again, was just right in line with our expectations.

Robert VanHimbergen: Maybe I would just add a couple of points to that, Glen, I'll get to your second question. 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. 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 H2 seeing that acceleration on pricing. On your second question, Glen, on margins, maybe I'll just give you color across both gross margins and EBITDA margins. 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. It is driven from H2 with productivity.

Bob VanHimbergen: Maybe I would just add a couple of points to that, Glen, I'll get to your second question. 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. 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 H2 seeing that acceleration on pricing. On your second question, Glen, on margins, maybe I'll just give you color across both gross margins and EBITDA margins. 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. It is driven from H2 with productivity.

Speaker #5: 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.

Speaker #5: But we've got a high degree of confidence in the second half seeing that acceleration on pricing. So then on your second question, Glenn, on margins.

Speaker #5: 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.

Speaker #5: 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.

Robert VanHimbergen: Procurement is doing a fantastic job with the supply base, volumes. This is partially offset by H1, which we saw muted growth from inflationary pressures and the high cost of inventory flowing through, that has flushed out. The US pet business had a fantastic Q2, and we expect that to continue here in H2. I mentioned, Jeff has mentioned, we do see pricing accelerating in H2 as well. 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. Number two, as we think about EBITDA margins, we are going to continue to invest in DTC to drive market share gains.

Bob VanHimbergen: Procurement is doing a fantastic job with the supply base, volumes. This is partially offset by H1, which we saw muted growth from inflationary pressures and the high cost of inventory flowing through, that has flushed out. The US pet business had a fantastic Q2, and we expect that to continue here in H2. I mentioned, Jeff has mentioned, we do see pricing accelerating in H2 as well. 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. Number two, as we think about EBITDA margins, we are going to continue to invest in DTC to drive market share gains.

Speaker #5: 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.

Speaker #5: And so that has 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.

Speaker #5: 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.

Speaker #5: 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.

Speaker #5: I can tell you there is a very high correlation with data-driven decisions that we see, but also a high correlation between the DTC spend and the market shares that we've picked up here in Q1 and Q2, particularly in Cordelia Quattro.

Robert VanHimbergen: I can tell you there is a very high correlation with data-driven decisions that we see, 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. Again, you've seen it in Q1, Q2. We're going to continue to invest in these product launches, and you see that step up here in Q3, Q4. You highlighted this as well, and this is absolutely true. There is a phasing to the business. Our business is more H1 weighted versus H2, there is some seasonality in there. Listen, I want to leave you with this.

Bob VanHimbergen: I can tell you there is a very high correlation with data-driven decisions that we see, 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. Again, you've seen it in Q1, Q2. We're going to continue to invest in these product launches, and you see that step up here in Q3, Q4. You highlighted this as well, and this is absolutely true. There is a phasing to the business. Our business is more H1 weighted versus H2, there is some seasonality in there. Listen, I want to leave you with this.

Speaker #5: We spent a lot of time with Bobby Moti and his marketing team on investments and the results. And again, you've seen it in Q1, Q2.

Speaker #5: 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.

Speaker #5: 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.

Speaker #5: 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.

Robert VanHimbergen: 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.

Bob VanHimbergen: 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.

Speaker #5: And in.

Speaker #4: Okay, thank you very much.

Glen Santangelo: Okay. Thank you very much.

Speaker #2: Thank you. Our next question comes from John Block with Stiefel. Your line is open.

Operator: Thank you. Our next question comes from Jonathan Block with Stifel. Your line is open.

Speaker #6: Great, guys. Thanks. Good morning. So Jeff or Bobby, the 8% organic constant currency is roughly $100 million of dollar growth, if I've got that correct.

Jonathan Block: Great, guys. Thanks. Good morning. Jeff or Bobby, 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 two biggest drivers of that 100 million. Can you just provide some sort of a framework? In other words, are those two 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.

Jon Block: Great, guys. Thanks. Good morning. Jeff or Bobby, 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 two biggest drivers of that 100 million. Can you just provide some sort of a framework? In other words, are those two 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.

Speaker #6: Year over year, you called out Zenbrelia and CQ as the two biggest drivers of that $100 million. Can you just provide some sort of a framework?

Speaker #6: In other words, are those two about half of that $100 million on a year-over-year basis in terms of growth, more than half, less than half?

Speaker #6: 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.

Speaker #5: Yeah, so John, so listen, as I think about I probably won't give you numbers. And we think about this as the basket of innovation.

Robert VanHimbergen: Yeah. John, listen, as I think about, I probably won't give you numbers, and we think about this as the basket of innovation growing well. Listen, we saw growth across the entire portfolio, right? We did see our basket of innovation grow $340 million. That's on a stable base. Again, stable base, we view as up or down low single digits. In H1, we saw strength in Q1 and actually growth in Q1. Q2 was a little bit more balanced, down one. Year to date, we're still up on our core business. Listen, we saw quality growth across the entire portfolio. In the US, again, up 11%, and yes, Zenrelia and Quattro were the leaders. Outside the US, continue to see strong performance from Zenrelia. AdTab grew over 30% internationally, and then the Credelio family performed well.

Bob VanHimbergen: Yeah. John, listen, as I think about, I probably won't give you numbers, and we think about this as the basket of innovation growing well. Listen, we saw growth across the entire portfolio, right? We did see our basket of innovation grow $340 million. That's on a stable base. Again, stable base, we view as up or down low single digits. In H1, we saw strength in Q1 and actually growth in Q1. Q2 was a little bit more balanced, down one. Year to date, we're still up on our core business. Listen, we saw quality growth across the entire portfolio. In the US, again, up 11%, and yes, Zenrelia and Quattro were the leaders. Outside the US, continue to see strong performance from Zenrelia. AdTab grew over 30% internationally, and then the Credelio family performed well.

Speaker #5: Growing well. But listen, we saw growth across the entire portfolio, right? So we did see our basket of innovation go 340 million dollars. That's on a stable base.

Speaker #5: 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.

Speaker #5: Q2 was a little bit more balanced, down one. But year to date, we're still up on our core business. But listen, we saw quality growth across the entire portfolio.

Speaker #5: In the U.S., again, up 11%. And yes, Zenbrelia and Quattro were the leaders. Outside the U.S., continue to see strong performance from Zenbrelia. AdTab grew over 30% internationally.

Speaker #5: And then the Cordelia 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 exterior and ruminant.

Robert VanHimbergen: On the pharms side, listen, in the US, grew 11% growth across all species. I'd say solid growth from Experior and Rumensin. Outside the US, 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%.

Bob VanHimbergen: On the pharms side, listen, in the US, grew 11% growth across all species. I'd say solid growth from Experior and Rumensin. Outside the US, 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%.

Speaker #5: 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%.

Speaker #6: Okay, got it. That was good color. Thank you. And then I'll pivot for the second question. Jeff, it was good to hear the demand trends, the early demand trends from Befrena.

Jonathan Block: Okay. Got it. That was good color. Thank you. 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 called 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, if that can start to take hold next year in 2027? Thank you.

Jon Block: Okay. Got it. That was good color. Thank you. 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 called 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, if that can start to take hold next year in 2027? Thank you.

Speaker #6: Maybe you can tell us where those successes are coming from. Are those called Zenbrelia accounts that are giving you a little bit of a running start into atopic derm?

Speaker #6: Is it traction with the corporates? And how do we think about the worldwide opportunity for Befrena, if that can start to take hold next year in 2027?

Speaker #6: Thank you.

Speaker #3: Yeah, thanks, John. You look, I just back up and say derm. We're excited. When I look at Befrena coming in and joining Zenbrelia, 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.

Jeff Simmons: Yeah. Thanks, John. Look, I just back up and say derm, we're excited when I look at Befrena coming in and joining Zenrelia, and then look at Elanco'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. Derm continues to grow nicely, double digit outside the US, as you know. The Zenrelia success is definitely going to pull Befrena. Look, we did the survey, John, and it showed 83% of veterinarians in the US 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. 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.

Speaker #3: And derm continues to grow nicely. Double digit outside the US, as you know. And the Zenbrelia success is definitely going to pull Befrena. So look, we did the survey, John, and it showed 83% of veterinarians in the US wanted to use Befrena.

Speaker #3: 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.

Speaker #3: 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.

Jeff Simmons: We're gating that demand. Supply is stepping up every week. You know the monoclonal phasing as we move the bioreactors up in size. All of that's going to help margin, it's going to help quantity. That demand is going to become, we think, more unconstrained and fully into the marketplace as we go into 2027 on the early side. 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. 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.

Speaker #3: And you know the monoclonal phasing, as we move the bioreactors up in size, all of that's going to help margins, 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 and the early side.

Speaker #3: So and yes, the Zenbrelia is open 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.

Speaker #3: 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.

Speaker #3: 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.

Jeff Simmons: Look for this to be a nice key driver for 2027 growth as we go in. I just think, Elanco, global derm, multiple products, derm leadership by the end of the decade is our focus.

Speaker #3: And then I just think, thank Elanco Global Derm, multiple products, derm leadership by the end of the decade is our focus.

Speaker #6: Thanks, guys.

Jonathan Block: Thanks, guys.

Jon Block: Thanks, guys.

Speaker #2: Thank you. Our next question comes from Daniel Clark with Lyrink. Your line is open.

Operator: Thank you. Our next question comes from Daniel Clark with Leerink. Your line is open.

Speaker #7: Great. Thanks. Good morning. Wanted to ask about the 40% first line usage in Zenbrelia and about half the clinics that you've highlighted. How, I guess, high do you kind of think that that can go given the trajectory that you've seen?

Daniel Clark: Great. Thanks. Good morning. Wanted to ask about the 40% first-line usage in Zenrelia in about half the clinics that you've highlighted. How, I guess, high do you think that can go given the trajectory that you've seen, what's the messaging that you're really leaning on to drive first-line usage?

Speaker #7: And what are the what's the messaging that you're really leaning on to drive first line usage?

Speaker #3: Yeah, thank you. Very much for the question. Yeah, I think it's probably one of the bigger proof points of the quarter for Zenbrelia. Zenbrelia, our number one contributor for growth for the entire company.

Jeff Simmons: Thank you very much for the question. I think it's probably one of the bigger proof points of the quarter for Zenrelia. Zenrelia, our number one 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, you just look, they're very connected globally. When they see 47 countries, they see the two and a half million dogs. I think the first-line treatment up at 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.

Speaker #3: 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.

Speaker #3: So when they see 47 countries, they see the two and a half million dogs. I think the first line treatment up at 40% demonstrates there is a vet confidence in this product.

Speaker #3: There's a desire to satisfy that pet owner right away. And they believe that Zenbrelia 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 an itching dog.

Jeff Simmons: 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 an itching dog. We continue to see that climb. We continue to see Zenrelia's leadership grow. As we just addressed with John, Befrena will help Zenrelia will help Befrena. Again, I think the international growth is really in the early innings as well. That's where we stand. A very strong quarter with Zenrelia.

Speaker #3: So we continue to see that climb. We continue to see Zenbrelia's leadership grow. And as we just addressed with John, Befrena will help Zenbrelia.

Speaker #3: Zenbrelia 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 very, very strong quarter with Zenbrelia.

Speaker #7: Great. And then just a quick follow-up. Any update on the timeline with the additional study and sort of what you're doing with the FDA on the label front?

Jeff Simmons: Great. Then just a quick follow-up. Any update on the timeline with the additional study and sort of what you're doing with the FDA on the label front? Thanks.

Daniel Clark: Great. Then just a quick follow-up. Any update on the timeline with the additional study and sort of what you're doing with the FDA on the label front? Thanks.

Speaker #7: Thanks.

Speaker #3: Yeah, no, new studies progressing as planned. Nothing new to report. Again, it's a time research is in process. And we anticipate submitting the data as planned.

Jeff Simmons: Yeah, no, new study's 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.

Speaker #3: To the FDA by no later than the end of the year.

Speaker #7: Great. Thank you.

Daniel Clark: Great. Thank you.

Speaker #2: Thank you. And our next question comes from Michael Riskin with Bank of America. Your line is open.

Operator: Thank you. Our next question comes from Michael Riskin with Bank of America. Your line is open.

Speaker #5: Great. Thanks. And congrats on the quarter and strong result. I'll stick with Zenbrelia and Quattro specifically. You've really continued to talk up share gains, share gains, share gains in terms of clinic penetration in terms of market share.

Michael Riskin: Great. Thanks, and congrats on the quarter and strong result. 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. Looks like Quattro accelerated. I kind of want to get into how much runway there is there. I think you're still obviously 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 as that other vendor out there. 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?

Michael Ryskin: Great. Thanks, and congrats on the quarter and strong result. 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. Looks like Quattro accelerated. I kind of want to get into how much runway there is there. I think you're still obviously 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 as that other vendor out there. 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?

Speaker #5: Both for Zenbrelia, year over year, quarter over quarter, looks like Quattro accelerated. I kind of want to get into how much runway there is there.

Speaker #5: 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.

Speaker #5: A lot of this is going to be clinics placing initial orders, sort of setting you up as that alternative, or as that other vendor out there.

Speaker #5: But when you think about peak market share opportunity, anything you can 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.

Michael Riskin: I know it feels pretty safe through the rest of 2026, but what about 2027, 2028, and just sort of the runway you see there? Thanks.

Michael Ryskin: I know it feels pretty safe through the rest of 2026, but what about 2027, 2028, and just sort of the runway you see there? Thanks.

Speaker #5: But we'll have to talk about '27, '28, and just sort of the runway you see there. Thanks.

Speaker #3: Yeah, 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 six blockbusters coming.

Jeff Simmons: Yeah. Thank you, Michael Riskin. 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. Bobby Modi said in the investor day, more clinics, more share, and new puppy starts. All three 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. Now we double down on the penetration within that clinic. I'm going to point to one thing just on Quattro, and again, Ellen de Brabander and the team, just life cycle management.

Speaker #3: But specifically to Quattro and Zenbrelia, I'll start with Quattro. I mean, Bobby said in the investor day, more clinics, more share, and new puppy starts.

Speaker #3: And all three 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.

Speaker #3: And now we double 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 lifecycle management.

Speaker #3: 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 Screw Worm and the worry of any tick bite with dogs.

Jeff Simmons: You've probably seen, the tick awareness and the linkage to Lyme disease, a recent "The Wall Street Journal" article, many media reports, even the new world screw worm and the worry of any tick bite with dogs. This black-legged tick, we have sent 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. I think that differentiation is getting solidified. It's getting widened, and we see best medicine. 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 UK is up next. As you know, that's a big $850 million market. I would say the same with Zenrelia. The news is coming. It's outstanding.

Speaker #3: This black-legged tick, we have sent 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 first choice.

Speaker #3: 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.

Speaker #3: Romero's out traveling right now in Australia and Japan, where we're launching. And Europe and UK is up next as you know, that's a big 850 million dollar market.

Speaker #3: And I would say the same with Zenbrelia. 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 three Jacks.

Jeff Simmons: Look, new research. I point a competitive study. The second head-to-head is out there with all three JAKs, 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. Really proud of the French team becoming number one right now in the Q1 with Zenrelia. Long runway, John Block, I see ahead, both markets are growing. The two markets are growing double digit outside the US.

Speaker #3: 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, Zenbrelia, efficacy, is demonstrated in research, and it's demonstrated in the 47 countries.

Speaker #3: Really proud of the French team becoming number one right now in the Q1 with Zenbrelia. So long runway, John, I see ahead. And both markets are growing.

Speaker #3: The two markets are growing double digit outside the US.

Speaker #5: 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.

Michael Riskin: Okay. Related to that, if I could, on the incremental investments you talked about in H2, I think you touched on it in an earlier answer in terms of you're seeing really good payoff with DTC, 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 two 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?

Michael Ryskin: Okay. Related to that, if I could, on the incremental investments you talked about in H2, I think you touched on it in an earlier answer in terms of you're seeing really good payoff with DTC, 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 two 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?

Speaker #5: 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.

Speaker #5: I kind of see those two 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.

Speaker #5: 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?

Speaker #5: Or do you just see kind of growing throughout the rest of this year, next year, beyond? So what's the right level until you've kind of hit saturation on that?

Michael Riskin: Do you just see kind of growing throughout the rest of this year, next year, beyond? What's the right level until you've kind of hit saturation on that? Thanks.

Michael Ryskin: Do you just see kind of growing throughout the rest of this year, next year, beyond? What's the right level until you've kind of hit saturation on that? Thanks.

Speaker #5: Thanks. Yeah, so it's a great question, Mike. And listen, I asked that as well. And again, I'll reiterate the time I spend with Bobby and his team and looking at data.

Robert VanHimbergen: Yeah, it's a great question, Mike. Listen, Mike, I ask that as well. Again, Mike, I'll reiterate. The time I spend with Bobby and his team and looking at data, I can't emphasize enough the direct correlation we can see with the OpEx spend and 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. We're going to continue to use data to make the decisions, and it's hard to put a timeframe 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. Listen, we're just going to keep going there and grow that top line with market share gains.

Bob VanHimbergen: Yeah, it's a great question, Mike. Listen, Mike, I ask that as well. Again, Mike, I'll reiterate. The time I spend with Bobby and his team and looking at data, I can't emphasize enough the direct correlation we can see with the OpEx spend and 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. We're going to continue to use data to make the decisions, and it's hard to put a timeframe 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. Listen, we're just going to keep going there and grow that top line with market share gains.

Speaker #5: And I can't emphasize enough the direct correlation we can see with the OpEx spend and DTC and the market share gains. It's just unbelievable data.

Speaker #5: 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.

Speaker #5: And it's hard to put a timeframe on that. But really pleased with the three points of Quattro growth we saw in market share growth we saw in Q1 and the four points in Q2.

Speaker #5: And so listen, 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.

Robert VanHimbergen: When we get to a point we don't see the return, that's where we'll scale it back.

Bob VanHimbergen: When we get to a point we don't see the return, that's where we'll scale it back.

Speaker #5: All right. Fair enough. Thanks.

Michael Riskin: All right. Fair enough. Thanks.

Michael Ryskin: All right. Fair enough. Thanks.

Speaker #2: Thank you. Our next question comes from Umar Rafat with Evercore ISI. Your line is open.

Operator: Thank you. Our next question comes from Umer Rafat with Evercore ISI. Your line is open.

Speaker #3: Good morning, guys. Thanks for taking my question. And congrats on all the execution on top-line growth. I wanted to focus on OpEx for a quick second.

Umer Rafat: Morning, guys. Thanks for taking my question, and congrats on all the execution on top-line growth. I wanted to focus on OpEx for a quick second. Top line's up 8% organically in Q2, and OpEx is up 10%. 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? 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?

Umer Raffat: Morning, guys. Thanks for taking my question, and congrats on all the execution on top-line growth. I wanted to focus on OpEx for a quick second. Top line's up 8% organically in Q2, and OpEx is up 10%. 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? 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?

Speaker #3: So, top line is up 8% organically in Q2, and OpEx is up 10%. So I guess my question to you is not even so much on the operating leverage.

Speaker #3: 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?

Speaker #3: 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?

Speaker #5: Yeah, so great question. And listen, I think a lot of the OpEx is particularly tied to the DTC, Umar. And so listen, we're going to keep that OpEx investment.

Robert VanHimbergen: Yeah. Great question. Listen, I think a lot of the OpEx is particularly tied to the DTC, Umer. Listen, 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 2027 margin growth and beyond, and you think about the algorithm that we gave at Investor Day, but it's Project Ascend. All right. 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. Listen, 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 four walls.

Bob VanHimbergen: Yeah. Great question. Listen, I think a lot of the OpEx is particularly tied to the DTC, Umer. Listen, 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 2027 margin growth and beyond, and you think about the algorithm that we gave at Investor Day, but it's Project Ascend. All right. 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. Listen, 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 four walls.

Speaker #5: 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 2027 margin growth and beyond—and you think about the algorithm that we gave at Investor Day—is Project Ascend.

Speaker #5: 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.

Speaker #5: And listen, I think we're at a new level with Ascend here recently. Really pleased, as I mentioned, by prepared remarks with the acceleration of projects across the OpEx as well as what's happening in the four walls.

Speaker #5: 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 continued improvement in operating margins and really funding some of that OpEx.

Robert VanHimbergen: Listen, we have a highly engaged team and a great cadence of reporting and meetings. What I expect to see moving forward is continued improvement in operating margins, and really funding some of that OpEx. I think you'll start seeing leverage here improve here in 2027 and beyond.

Bob VanHimbergen: Listen, we have a highly engaged team and a great cadence of reporting and meetings. What I expect to see moving forward is continued improvement in operating margins, and really funding some of that OpEx. I think you'll start seeing leverage here improve here in 2027 and beyond.

Speaker #5: But I think you'll start seeing leverage here improve in 2027 and beyond.

Speaker #2: Thank you. Our next question comes from Brandon Vasquez with William Blair. Your line is open.

Operator: Thank you. Our next question comes from Brandon Vazquez with William Blair. Your line is open.

Speaker #6: Hey, everyone. Thanks for taking the questions in. Congrats on the 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?

Brandon Vazquez: Hi, everyone. Thanks for taking the questions and congrats on a nice quarter here. One, I think, Jeff, you had briefly mentioned this, 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.

Speaker #6: 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.

Speaker #4: Yeah, I think overall, a durable market. As I said, after the January/February weather bump, we've seen a rebound in the market. So I think the market's robust.

Jeff Simmons: I think overall, a durable market that I said after the January-February weather bump, we've seen a rebound in the market. I think the markets are robust. You're seeing that in the results. The pet and protein trends, I point to our ruminants, up 17%. The cattle, the dairy business. I think the overall global market, remember, US pet health's about a third of the market. The other two-thirds 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. 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.

Speaker #4: You're seeing that in the results. The PET and protein trends, I mean, I point to our ruminants up 17%. I mean, the cattle, the dairy business.

Speaker #4: So I think the overall global market, remember, US PETL's about a third of the market. The other two-thirds really start to look at international PET and protein as big drivers as we go from this $40 billion industry to $60 billion.

Speaker #4: I think that's important. But yeah, when you get into some of the competitive spaces, there's a combination of things. One is it's selling the portfolio.

Speaker #4: 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.

Jeff Simmons: 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 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. It's competitive, but it's durable, and it's been very responsible in the marketplace. We sell our portfolios in this industry, and that's what we're doing.

Speaker #4: And that's where I see the most is a lot of competitive spend to target and niche markets. We like where we are with our reps.

Speaker #4: We got one of the largest teams in the industry with the best relationship, a real callout to our distribution partners and what they've done.

Speaker #4: 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.

Speaker #4: And that's what we're doing.

Speaker #6: Okay. Great. And Jeff, I don't ask you enough on farm animals, so let me ask on farm side. Exterior continues to do well. Still up double digits, but you're getting more penetrated into the TAM that you guys have outlined.

Brandon Vazquez: Okay, great. Jeff, I don't ask you enough on farm animals, so let me ask on farm side. Experior continues to do well, still up double digits, but you're getting more penetrated into the TAM 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 what we should expect growth rates in those two products to be? Thanks, guys.

Speaker #6: Between exterior and Bovaire, 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 those two products to be?

Speaker #6: Thanks, guys.

Speaker #4: Yeah, 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.

Jeff Simmons: Yeah. They're going to continue to be growth drivers H2 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. 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. 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's 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 US. Bovaer, small base, but will continue to climb.

Speaker #4: 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.

Speaker #4: 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.

Speaker #4: I point to probably ruminants and poultry as we said in our investor day is where we're going to lean in heavily. Bovaire and exterior going to exterior is going to have tougher compares, but still going to be a nice growth driver as it globalizes and we get more days.

Speaker #4: On use here in the US and Bovaire, small base but will continue to climb. We love the farmer value and the farmer retention on Bovaire in the US dairy industry.

Jeff Simmons: We love the farmer value and the farmer retention on Bovaer in the US dairy industry, and that will climb as well and be growth drivers in 2027.

Speaker #4: And that will climb as well and be growth drivers in 2027.

Speaker #2: Thank you. Our next question comes from Dave Wessenberg with Piper Sandler. Your line is open.

Operator: Thank you. Our next question comes from Dave Wessenberg with Piper Sandler. Your line is open.

Speaker #7: Hey, thank you for taking the question. I'm actually going to continue with that farm animal question. Can you talk about how long herd expansion does support growth?

Dave Wessenberg: Hey, thank you for taking the question. I'm actually going to continue with that farm animal question. Can you talk about how long herd expansion does support growth? How much of this would be, in fact, a multi-year driver? You kind of mentioned on the call, innovation, 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 two, three years into it. It would be great to hear how you could be growing in that 2028, 2029 timeframe. If I can ask just one more, sweeping into capital deployment. Now that you are approximately three times or heading there, does this change your capital deployment strategy? Thank you very much.

Dave Westenberg: Hey, thank you for taking the question. I'm actually going to continue with that farm animal question. Can you talk about how long herd expansion does support growth? How much of this would be, in fact, a multi-year driver? You kind of mentioned on the call, innovation, 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 two, three years into it. It would be great to hear how you could be growing in that 2028, 2029 timeframe. If I can ask just one more, sweeping into capital deployment. Now that you are approximately three times or heading there, does this change your capital deployment strategy? Thank you very much.

Speaker #7: I mean, how much of this would be, in fact, a multi-year driver? And then you kind of mentioned on the call, innovation not desire for no air pockets.

Speaker #7: 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 Exterior and Bovaer.

Speaker #7: Well, maybe not Bovaire, but two or three years into it. So it would be great to hear how you could be growing in that 2028–2029 time frame.

Speaker #7: And if I can ask just one more sleeping in to capital deployment, now that you are approximately three times or heading there, does this change your capital deployment strategy?

Speaker #7: Thank you very much.

Speaker #4: Thanks, David. Yeah, look, I think just speaking specifically of the beef industry, yes, we saw a tick up about 1% year on year in replacement cattle.

Jeff Simmons: Thanks, Dave. Look, I think speaking specifically of the beef industry, yes, we saw a tick up about 1% year on year in replacement cattle, so a rebuild, but much slower. The drought's definitely been a headwind. Look, I see overall beef demand right now is great globally. The beneficiaries are Argentina and Brazil and other smaller markets, Canada, others. I would say this is going to be a really nice runway. At the same time, dairy and poultry specifically, and 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's been integrated nicely. 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.

Speaker #4: So a rebuild, but much slower. The droughts 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.

Speaker #4: And I would just say, this is going to be a really nice runway. At the same time, dairy and poultry specifically, and in places, pork, are taking advantage of it.

Speaker #4: There's a lot of innovation right now in dairy, as an example. And we're seeing that our AHV acquisition's been integrated nicely. So I see a real positive moving forward.

Speaker #4: Look, we see the industry 60% farm animal, this protein thing is going to be, I think, a positive bump for our industry. Ilanco's leaders in the US and other places, we're going to lean in pretty heavily.

Jeff Simmons: Elanco's leaders in the US 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.

Speaker #4: Alan 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.

Speaker #4: Alan's farm animal innovation team is as robust as probably we've ever seen it in our history.

Speaker #1: Yeah, I mean, on the capital allocation question, David, hey, listen, no change to the strategy that we've outlined in the past. Debt pay down still the number one use of free cash flow right now.

Robert VanHimbergen: Yeah. On the capital allocation question, David, hey, listen, no change to the strategy that we've outlined in the past. Debt paydown's still the number one 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. As we get below that 3, as we've said before, that'll unlock capital allocation flexibility, and right now we're hyper-focused on getting there.

Bob VanHimbergen: Yeah. On the capital allocation question, David, hey, listen, no change to the strategy that we've outlined in the past. Debt paydown's still the number one 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. As we get below that 3, as we've said before, that'll unlock capital allocation flexibility, and right now we're hyper-focused on getting there.

Speaker #1: We're continuing 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.

Speaker #1: But think of these as smaller tuck-under opportunities. But as we get below that three, as we've said before, that'll unlock capital allocation flexibility. And right now, we're hyper-focused on getting there.

Speaker #2: Thank you. And our next question comes from Chris Schott with JP Morgan. Your line is open.

Operator: Thank you. Our next question comes from Chris Schott with J.P. Morgan. Your line is open.

Speaker #5: Thank you so much. So first, let's just on ad tab. 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.

Chris Schott: Thank you so much. First one's just on AdTab. 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 uptick, and how big you think that product can get over time. 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 % of dogs are currently on a broad-spectrum product, and where do you see that going over the next several years? Thank you.

Speaker #5: And second question is just on parasiticides and Cordelia Quattro. Can you talk about the growth you're seeing for the broad spectrum parasiticide category? I don't know if you have the data, but what percent of dogs are currently on a broad spectrum product?

Speaker #5: And where do you see that going over the next several years? Thank you.

Speaker #4: Yeah, thank you for the questions. On ad tab, you've got a 600 million dollar plus market in Europe that is products that can be even scripted here in the US that are retail there.

Jeff Simmons: Yeah. 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 US that are retailed there. Look, I think we said this is well on a path to be a blockbuster. It's number one in the marketplace. It's grown double digits now for quite a few years in a row. 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 three or four new SKUs globally. The Advantage brand loyalty is strong. Our launch capabilities are strong. We see a really nice runway for this product.

Speaker #4: And look, I think we said this as well on a path to be a blockbuster. It's number one in the marketplace. It's grown double digits now for quite a few years in a row.

Speaker #4: Real credit to the European team and how they're launching the product. 30% growth this past quarter. Look, I think I point to ad tab as we put advantage into the marketplace in three or four new SKUs globally.

Speaker #4: 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.

Jeff Simmons: We'll have some tougher compares going forward, look for this to become a blockbuster and continue to be a leading product in that $600 million market that continues to grow nicely. I think it does demonstrate that pet owner that wants to shop in multiple places, AdTab's an example of that. Look, back to the broad spectrum. I point to, it's a $1.5 billion market. It's continuing to grow. It's going to grow double-digit outside the US. We think it'll be low mid-single-digit here in the US. Price has been durable. Look, we see Quattro, fastest-growing product in here, took 7 points of market share in H1, and we continue to see this being best medicine in the most attractive animal health segment.

Speaker #4: But look for this to become a blockbuster and continue to be a leading product in that 600 million dollar market that continues to grow nicely.

Speaker #4: I think it does demonstrate that pet owner that wants to shop in multiple places. Ad tab's an example of that. And look, back to the broad spectrum.

Speaker #4: I point to it's a 1.5 billion dollar market. It's continuing to grow. It's going to grow double digit outside the US. We think it'll be low mid-single digit here in the US.

Speaker #4: Price has been durable. And look, we see Quattro fastest growing product in here. Took a 7 points of market share in the first half.

Speaker #4: 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.

Jeff Simmons: 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.

Speaker #4: And I'm really excited about the European launch coming up.

Speaker #2: Thank you. And our last question comes from Steve Decker with KeyBank Capital Markets. Your line is open.

Operator: Thank you. Our last question comes from Steve Decker with KeyBanc Capital Markets. Your line is open.

Speaker #6: Hey, thanks for the question. I guess just on—I've been really... I mean, it sounds like you're seeing really nice competitive wins against New Melvi.

Steve Decker: Hey, thanks for the question. I guess just on Zenrelia. It sounds like you're seeing really nice competitive wins against NUMELVI. Maybe just could you talk about what's driving that? Is there anything beyond just efficacy you can tell us? Thank you.

Steve Dechert: Hey, thanks for the question. I guess just on Zenrelia. It sounds like you're seeing really nice competitive wins against NUMELVI. Maybe just could you talk about what's driving that? Is there anything beyond just efficacy you can tell us? Thank you.

Speaker #6: Maybe could you just talk about what's driving that? Is there anything beyond just efficacy? You can tell us. Thank you.

Speaker #4: Yeah, Zenrelli, as we mentioned, a really great quarter and a continued momentum. It all comes back to efficacy and the derm market, right? And that will be the story we're talking about in two years.

Jeff Simmons: Yeah. Zenrelia, as we mentioned, a really great quarter and the continued momentum. It all comes back to efficacy in the derm market, right? That will be the story we're talking about in two years, and what I'm excited about is the whole portfolio that we have coming with Zenrelia and Befrena and the next products. 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. 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. Anyone in the derm market, if you're going to compete, it's got to work.

Speaker #4: And what I'm excited about is the whole portfolio that we have coming with Zenrelli and Bufrena, and the next products. But it's playing out in Europe.

Speaker #4: Where you see the multiple products, we've gained share. We continue to grow. We've seen up to 40% share in Europe. And I think, even in the head-to-head study that was just released by a competitor that I mentioned, it just continues to demonstrate that, hey, we've got a differentiated product, in our opinion, that could be best medicine.

Speaker #4: 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.

Jeff Simmons: It's probably the most visible problem to a pet owner, if it works or doesn't work, and Zenrelia is playing well there. I would point to a longer runway as we continue to globalize and launch this product.

Speaker #4: If it works or doesn't work, and Zenrelli is playing well there. And I would point to a longer runway as we continue to globalize and launch this product.

Speaker #2: Thank you. This concludes the question and answer session. I would now like to turn it back to Jeff Simmons, CEO, for closing remarks.

Operator: Thank you. This concludes the question and answer session. I would now like to turn it back to Jeff Simmons, CEO, for closing remarks.

Speaker #4: Thank you for the time. And real call out to the Ilanco 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.

Jeff Simmons: Thank you for the time, real call-out to the Elanco team for a 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. 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 our three-year algorithm out there. We'll look at our pushes and pulls overall, and we'll be very accessible to you as our shareholders, and any questions that you have post these calls and between the earnings response. Just know, yes, it is a dynamic marketplace, our strategy is working. innovation portfolio and productivity is delivering growth, innovation, and cash.

Speaker #4: 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.

Speaker #4: We'll continue to guide quarterly. We've got our 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.

Speaker #4: 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.

Speaker #4: And this first semester, this first six months, was the best six months I've seen since our IPO. But it's been built over the last six years.

Jeff Simmons: This first semester, this first six months, was the best six months I've seen since our IPO, but it's been built over the last six years. Thank you for joining us today, and we look forward to continuing engaging with you as investors going forward. Have a great day.

Speaker #4: 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.

Q2 2026 Elanco Animal Health Inc Earnings Call

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