Elanco Animal Health Reports Fourth Quarter and Full Year 2025 Results
Rhea-AI Summary
Elanco (NYSE: ELAN) reported Q4 2025 revenue of $1,144M (+12% reported, +9% organic CC) and full-year 2025 revenue of $4,715M (+6% reported, +7% organic CC). Innovation revenue exceeded target at $892M and 2026 innovation target raised to $1.15B. Reported net loss was $276M in Q4 and $232M for 2025; adjusted EBITDA was $189M Q4 and $901M FY. Full-year 2026 guidance: revenue $4,950–$5,020M, adjusted EBITDA $955–$985M, adjusted EPS $1.00–$1.06, and year-end net leverage target 3.1x–3.3x.
Positive
- Innovation revenue $892M in 2025; target raised to $1.15B for 2026
- Full-year 2026 revenue guidance $4,950M–$5,020M (4%–6% organic CC growth)
- Adjusted EPS guidance $1.00–$1.06 (10% midpoint increase)
- Net leverage improved to 3.6x adjusted EBITDA, targeting <3.3x in 2026
Negative
- Reported net loss $276M in Q4 2025 and $232M for full-year 2025
- Asset impairment and restructuring charges $202M recorded in Q4 2025
- Net interest expense rose 74% in Q4 2025 to $80M
- Cash from operations down to $108M in Q4 2025 from $177M prior year
News Market Reaction – ELAN
In the Feb 24 session, ELAN gained 6.59%, reflecting a notable positive market reaction. Argus tracked a peak move of +16.9% during that session. Our momentum scanner triggered 30 alerts that day, indicating elevated trading interest and price volatility.
Data tracked by StockTitan Argus on the day of publication.
Key Figures
Previous Earnings Reports
| Date | Event | Sentiment | 24h Move | Catalyst |
|---|---|---|---|---|
| Nov 05 | Q3 2025 earnings | Positive | -4.0% | Strong Q3 growth with guidance raised for revenue, innovation, EBITDA and leverage. |
| Aug 07 | Q2 2025 earnings | Positive | +18.1% | Solid Q2 results, higher 2025 guidance, and improved leverage plus debt paydown. |
| May 07 | Q1 2025 earnings | Positive | +26.3% | Q1 beat on adjusted metrics, raised revenue outlook and better leverage targets. |
| Feb 25 | FY 2024 earnings | Neutral | -3.7% | Flat 2024 revenue, solid EBITDA, higher innovation target but notable FX headwinds. |
| Nov 07 | Q3 2024 earnings | Positive | +12.8% | Q3 growth, large divestiture gain, and key FDA approvals supporting outlook. |
24h Move is the share-price change in the day after each event; other market factors may also have contributed.
Earnings releases have often produced sizable moves, generally positive on strong guidance but with occasional negative reactions despite solid fundamentals.
Recent earnings updates from Q3 2024 through Q3 2025 show Elanco driving steady organic constant currency growth, expanding its innovation portfolio, and progressively improving net leverage targets. Multiple quarters featured raised revenue and innovation guidance, along with growing adjusted EBITDA. The current Q4 and full-year 2025 report, coupled with 2026 guidance, continues this pattern of emphasizing mid‑single digit organic growth, high‑single digit adjusted EBITDA expansion, and increasing innovation revenue contributions.
Key Terms
adjusted ebitda financial
organic constant currency financial
net leverage ratio financial
monoclonal antibody medical
effective tax rate financial
non-gaap financial
royalty monetization financial
AI-generated analysis. How Rhea-AI works. Not financial advice.
Raising 2026 Innovation Target; Full Year 2026 Guidance of
- Fourth Quarter 2025 Financial Results:
- Revenue of
$1,144 million 12% on a reported basis;9% in organic constant currency - Reported Net Loss of
$276 million $64 million - Adjusted EBITDA of
$189 million 16.7% - Reported EPS of
$(0.56) $0.13
- Revenue of
- Full Year 2025 Financial Results:
- Exceeded innovation revenue target at
$892 million - Revenue of
$4,715 million 6% on a reported basis and7% in organic constant currency - Reported Net Loss of
$232 million $473 million - Adjusted EBITDA of
$901 million 19.2% - Reported EPS of
$(0.47) $0 - Net leverage ratio of 3.6x Adjusted EBITDA
- Exceeded innovation revenue target at
- Full Year 2026 Guidance:
- Raising innovation revenue target to
$1.15 billion - Revenue of
$4,950 million $5,020 million 4% to6% organic constant currency growth - Adjusted EBITDA of
$955 million $985 million 8% at midpoint - Adjusted EPS of
$1.00 $1.06 10% at midpoint - Year-end net leverage ratio target of 3.1x to 3.3x
- In line with three-year outlook introduced at December Investor Day, outlining mid-single digit top-line organic constant currency growth, high-single digit Adjusted EBITDA growth, and low double-digit Adjusted EPS growth
- Raising innovation revenue target to
"Elanco delivered significant progress across our strategic priorities of growth, innovation, and cash in 2025," said Jeff Simmons, President and CEO of Elanco. "We achieved a strong fourth quarter with
Select Business Highlights Since the Last Earnings Call
- Received USDA approval for Befrena™, a new anti-IL31 monoclonal antibody (mAb) injection targeting canine allergic and atopic dermatitis; recommended at a dosing interval of 6 to 8 weeks post-treatment vs. 4 to 8 weeks for the current market competitor
- Credelio Quattro™ achieved continued dollar share gains of broad-spectrum sales out of
U.S. vet clinics in Q4, at the same pace as in Q3**; Australian approval received in February as Advocate™ Ultra Chew - Achieved Zenrelia™ use in approximately
50% ofU.S. clinics and double-digit share of theU.S. JAK market exiting December**; efficacy driving global momentum and share gains, with approximately40% share of JAK market inBrazil , over30% share inJapan , over10% share in theU.K. , and double-digit share inFrance ,Italy , andSpain , outperforming the competitive entrant*** - Experior® 2025 sales over
$200 million 80% year over year; AdTab™ continued robust growth trajectory with Q4 sales up over50% year over year
**Per Kynetec Q3 and Q4 data
***Internal estimates based on multiple data sources
Select Investor Day Highlights (December 2025)
- Detailed three-year outlook with annual mid-single digit top-line organic constant currency growth driven by a consistent flow of high-impact innovation, high-single digit Adjusted EBITDA growth and low double-digit Adjusted EPS growth, all starting in 2026
- Expecting free cash flow of at least
$1 billion - Expected innovation revenue contribution of approximately
$1.1 billion $1.15 billion - Expecting five to six blockbuster-potential approvals over the next six years. Two in-house technology development platforms contributing to next wave innovation pipeline: monoclonal antibody discovery and immuno-therapeutics
- Announced intended closure of German animal R&D facility and targeted reduction to manufacturing workforce along with increased investment in Elanco Innovation Laboratories at
Indiana headquarters and continued investments inU.S. manufacturing with greater clarity onU.S. tariffs and accelerated USDA regulatory timelines. This includes an accelerated conditional approval pathway for a potential first-in-class immuno-therapeutic major pet blockbuster, expected in the next two to three years - Outlined Elanco Ascend productivity initiative expected to deliver
$200 million $250 million 30% achieved in 2026 - Announced restructuring as part of Elanco Ascend to support margin expansion, optimize footprint and further increase innovation capacity. Approximately
$155 million $116 million $25 million $30 million $25 million $60 million
Financial Highlights
Fourth Quarter Results (dollars in millions, except per share amounts) | 2025 | 2024 | Change (%) | Organic | |
Pet Health | 11 % | 9 % | |||
Farm Animal | 12 % | 10 % | |||
Cattle | 17 % | 15 % | |||
Poultry | 11 % | 8 % | |||
Swine | 3 % | 1 % | |||
Contract Manufacturing and Other (2) | 36 % | ||||
Total Revenue | 12 % | 9 % | |||
Gross Profit | 13 % | ||||
Reported Net Loss | NM | ||||
Adjusted EBITDA | 7 % | ||||
Reported EPS | NM | ||||
Adjusted EPS | (7) % | ||||
Full Year Results (dollars in millions, except per share amounts) | 2025 | 2024 | Change (%) | Organic | |
Pet Health | 7 % | 7 % | |||
Farm Animal | 5 % | 8 % | |||
Cattle | 12 % | 11 % | |||
Poultry | 8 % | 7 % | |||
Swine | 4 % | 3 % | |||
Aqua | $— | (100) % | |||
Contract Manufacturing and Other (2) | 15 % | ||||
Total Revenue | 6 % | 7 % | |||
Gross Profit | 6 % | ||||
Reported Net (Loss) Income | NM | ||||
Adjusted EBITDA | (1) % | ||||
Reported EPS | NM | ||||
Adjusted EPS | 3 % | ||||
(1) Organic CC Growth = Represents revenue growth excluding the impacts from prior year divestiture of the aqua business, which was divested July 9, 2024, royalty revenue that was sold to a third party and the impact of foreign exchange rates. |
(2) Primarily represents revenue from arrangements in which the company manufactures products on behalf of a third party and royalty revenue. Sold royalty revenue to which the company is no longer entitled, totaled |
Numbers may not add due to rounding. |
NM - Not meaningful. |
Fourth Quarter Results
In the fourth quarter of 2025, revenue was
Pet Health revenue was
Farm Animal revenue was
Gross profit was
Total operating expenses were
Asset impairment, restructuring, and other special charges were
Net interest expense was
Other income was
The reported effective tax rate was (6.5)% in the fourth quarter of 2025 compared to
Net loss for the fourth quarter of 2025 was
Adjusted EBITDA was
Working Capital and Balance Sheet
Cash provided by operations was
As of December 31, 2025, Elanco's net leverage ratio was 3.6x adjusted EBITDA, a reduction of 0.1x to September 30, 2025.
Financial Guidance
Elanco is providing financial guidance for the full year 2026, summarized in the following table, subject to the assumptions described below:
2026 Full Year (dollars in millions, except per share amounts) | Guidance | ||
Revenue (1) | to | ||
Adjusted EBITDA | to | ||
Adjusted Earnings per Share | to | ||
(1) Revenue guidance excludes royalty revenue that was sold to a third party. |
For the full year, the company expects a
"We are entering 2026 with positive momentum, and strong confidence in our IPP strategy to drive continued execution and value creation," said Bob VanHimbergen, Executive Vice President and CFO of Elanco. "Our full-year outlook is balanced and consistent with the framework provided at our December Investor Day. We anticipate sustainable, competitive revenue growth as our innovation portfolio scales globally, on top of a stabilizing base. This innovation, combined with strategic pricing, helps to insulate us from broader macro pressures. Elanco Ascend, our productivity initiative, is on track to enable adjusted EBITDA margin expansion starting this year. We expect accelerating free cash flow over the next three years to further strengthen our balance sheet and improve our net leverage ratio."
2026 First Quarter (dollars in millions, except per share amounts) | Guidance | ||
Revenue (1) | to | ||
Adjusted EBITDA | to | ||
Adjusted Earnings per Share | to | ||
(1) Revenue guidance excludes royalty revenue that was sold to a third party. |
In the first quarter, the company expects a
The 2026 full year and first quarter financial guidance reflects foreign exchange rates as of earlier this month. Further details on guidance, including GAAP reported to non-GAAP adjusted reconciliations, are included in the financial tables of this press release and will be discussed on the company's conference call this morning.
A reconciliation of forward-looking non-GAAP measures, including adjusted EPS, adjusted EBITDA and adjusted EBITDA margin guidance, to the most directly comparable GAAP measures is not provided because comparable GAAP measures for such measures are not reasonably accessible or reliable due to the inherent difficulty in forecasting and quantifying measures that would be necessary for such reconciliation. Namely, Elanco is not, without unreasonable effort, able to reliably predict the impact of net interest expense; income tax expense/benefit; depreciation and amortization charges; asset impairment, restructure and other special charges; sold royalty revenue; and other adjustments. In addition, Elanco believes such a reconciliation would imply a degree of precision and certainty that could be confusing to investors. These items are uncertain, depend on various factors and may have a material impact on future GAAP results. See "Cautionary Statement Regarding Forward-Looking Statements" and "Use of Non-GAAP Financial Measures."
WEBCAST & CONFERENCE CALL DETAILS
Elanco will host a webcast and conference call at 8:00 a.m. Eastern Time today, during which company executives will review fourth quarter and full year 2025 financial and operational results, provide financial guidance for the full year and first quarter of 2026, and respond to questions from analysts. Investors, analysts, members of the media and the public may access the live webcast and accompanying slides by visiting the Elanco website at https://investor.elanco.com and selecting Events and Presentations. A replay of the webcast will be archived and made available a few hours after the event on the company's website, at https://investor.elanco.com/events-and-presentations/default.aspx#module-event-upcoming.
ABOUT ELANCO
Elanco Animal Health Incorporated (NYSE: ELAN) is a global leader in animal health dedicated to innovating and delivering products and services to prevent and treat disease in farm animals and pets, creating value for farmers, pet owners, veterinarians, stakeholders and society as a whole. With more than 70 years of animal health heritage, we are committed to breaking boundaries and going beyond to help our customers improve the health of animals in their care, while also making a meaningful impact on our local and global communities. At Elanco, we are driven by our vision of Food and Companionship Enriching Life and our purpose – to Go Beyond for Animals, Customers, Society and Our People. Learn more at www.elanco.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements concerning product launches and revenue from such products, our 2026 full year and first quarter guidance and long-term expectations, our expectations regarding debt levels, and expectations regarding our industry and our operations, performance and financial condition, and including, in particular, statements relating to our business, growth strategies, distribution strategies, product development efforts and future expenses.
Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important risk factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions, including but not limited to the following:
- operating in a highly competitive industry;
- the success of our research and development (R&D), regulatory approval and licensing efforts;
- the impact of disruptive innovations and advances in veterinary medical practices, animal health technologies and alternatives to animal-derived protein;
- competition from generic products that may be viewed as more cost-effective;
- changes in regulatory restrictions on the use of antibiotics in farm animals;
- an outbreak of infectious disease carried by farm animals;
- risks related to the evaluation of animals;
- consolidation of our customers and distributors;
- an increased use of alternative distribution channels or changes within existing distribution channels;
- our dependence on the success of our top products;
- our ability to complete acquisitions and divestitures and to successfully integrate the businesses we acquire;
- our ability to implement our business strategies or achieve targeted cost efficiencies and gross margin improvements;
- manufacturing problems and capacity imbalances, including at our contract manufacturers;
- fluctuations in inventory levels in our distribution channels;
- risks related to the use of artificial intelligence in our business;
- our dependence on sophisticated information technology systems and infrastructure, including the use of third-party, cloud-based technologies, and the impact of outages or breaches of the information technology systems and infrastructure we rely on;
- the impact of weather conditions, including those related to climate change, and the availability of natural resources;
- demand, supply and operational challenges associated with the effects of a human disease outbreak, epidemic, pandemic or other widespread public health concern;
- the loss of key personnel or highly skilled employees;
- adverse effects of labor disputes, strikes and/or work stoppages;
- the effect of our substantial indebtedness on our business, including restrictions in our debt agreements that limit our operating flexibility and changes in our credit ratings that lead to higher borrowing expenses and restrict access to credit;
- changes in interest rates that adversely affect our earnings and cash flows;
- risks related to the write-down of goodwill or identifiable intangible assets;
- the lack of availability or significant increases in the cost of raw materials;
- risks related to foreign and domestic economic, political, legal and business environments;
- risks related to foreign currency exchange rate fluctuations;
- risks related to underfunded pension plan liabilities;
- our current plan not to pay dividends and restrictions on our ability to pay dividends;
- the potential impact that actions by activist shareholders could have on the pursuit of our business strategies;
- risks related to tax expense or exposures;
- actions by regulatory bodies, including as a result of their interpretation of studies on product safety;
- the possible slowing or cessation of acceptance and/or adoption of our farm animal sustainability initiatives;
- the impact of increased regulation or decreased governmental financial support related to the raising, processing or consumption of farm animals;
- risks related to tariffs, trade protection measures or other modifications of foreign trade policy;
- the impact of litigation, regulatory investigations and other legal matters, including the risk to our reputation and the risk that our insurance policies may be insufficient to protect us from the impact of such matters;
- challenges to our intellectual property rights or our alleged violation of rights of others;
- misuse, off-label or counterfeiting use of our products;
- unanticipated safety, quality or efficacy concerns and the impact of identified concerns associated with our products;
- insufficient insurance coverage against hazards and claims;
- compliance with privacy laws and security of information;
- risks related to environmental, health and safety laws and regulations; and
- inability to achieve our aspirations or meet the expectations of stakeholders with respect to environmental, social and governance matters.
For additional information about the factors that could cause actual results to differ materially from forward-looking statements, please see the company's latest Form 10-K and Form 10-Qs filed with the Securities and Exchange Commission. Although we have attempted to identify important risk factors, there may be other risk factors not presently known to us or that we presently believe are not material that could cause actual results and developments to differ materially from those made in or suggested by the forward-looking statements contained in this press release. If any of these risks materialize, or if any of the above assumptions underlying forward-looking statements prove incorrect, actual results and developments may differ materially from those made in or suggested by the forward-looking statements contained in this press release. We caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this press release. Any forward-looking statement made by us in this press release speaks only as of the date thereof. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or to revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should be viewed as historical data.
Use of Non-GAAP Financial Measures:
We use non-GAAP financial measures, such as revenue growth excluding the impact of divestitures, foreign exchange rate effects and royalty revenue sold to a third party; EBITDA; adjusted EBITDA; adjusted EBITDA margin; adjusted net income; adjusted EPS; adjusted gross profit; adjusted gross margin; net debt and net debt leverage to assess and analyze our operational results and trends as explained in more detail in the reconciliation tables later in this release.
We believe these non-GAAP financial measures are useful to investors because they provide greater transparency regarding our operating performance. Reconciliation of non-GAAP financial measures and reported
Availability of Certain Information
We use our website to disclose important company information to investors, customers, employees and others interested in Elanco. We encourage investors to consult our website regularly for important information about Elanco, including an Investor Overview presentation containing a general overview of the business, which can be found in the Events and Presentations page of our website.
Additional Information
We define innovation revenue as revenue from new products, lifecycle management and certain geographic expansions and business development transactions that is incremental in reference to product revenue in 2020 and does not include the expected impact of cannibalization on the base portfolio.
We define organic constant currency revenue growth as revenue growth excluding the impacts from our prior year divestiture of the aqua business, which was divested on July 9, 2024, royalty revenue that was sold to a third party and the impact of foreign exchange rates.
Elanco Animal Health Incorporated | |||||||
Unaudited Consolidated Statements of Operations | |||||||
(Dollars and shares in millions, except per share data) | |||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||
2025 | 2024 | 2025 | 2024 | ||||
Revenue | $ 1,144 | $ 1,020 | $ 4,715 | $ 4,439 | |||
Cost of sales | 555 | 501 | 2,122 | 2,003 | |||
Gross profit | 589 | 519 | 2,593 | 2,436 | |||
Research and development | 93 | 81 | 368 | 344 | |||
Marketing, selling and administrative | 338 | 300 | 1,430 | 1,314 | |||
Amortization of intangible assets | 139 | 130 | 543 | 527 | |||
Asset impairment, restructuring and other | 202 | 7 | 237 | 150 | |||
Gain on divestiture | — | — | — | (640) | |||
Interest expense, net of capitalized interest | 80 | 46 | 220 | 235 | |||
Other (income) expense, net | (4) | 6 | 19 | 18 | |||
(Loss) income before income taxes | (259) | (51) | (224) | 488 | |||
Income tax expense (benefit) | 17 | (43) | 8 | 150 | |||
Net (loss) income | $ (276) | $ (8) | $ (232) | $ 338 | |||
(Loss) earnings per share: | |||||||
Basic | $ (0.56) | $ (0.02) | $ (0.47) | $ 0.68 | |||
Diluted | $ (0.56) | $ (0.02) | $ (0.47) | $ 0.68 | |||
Weighted average shares outstanding: | |||||||
Basic | 496.9 | 494.4 | 496.4 | 494.0 | |||
Diluted | 496.9 | 494.4 | 496.4 | 497.3 | |||
Elanco Animal Health Incorporated
Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information
(Unaudited)
(Dollars and shares in millions, except per share data)
We use non-GAAP financial measures, such as organic constant currency revenue growth, adjusted gross profit, adjusted gross margin percentage, adjusted net income, adjusted EPS, EBITDA, adjusted EBITDA and adjusted EBITDA margin and net debt and net debt leverage, that differ from financial measures reported in conformity with GAAP. The company believes these non-GAAP measures provide useful information to investors. Among other things, they may help investors assess and analyze our operational results and trends of our ongoing operations. Management also uses these non-GAAP measures internally to evaluate the performance of the business and in making resource allocation decisions. Investors should consider these non-GAAP measures in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. Reconciliation of non-GAAP financial measures and reported GAAP financial measures are included in the tables below.
Adjusted Gross Profit and Gross Margin Percentage
We define gross profit as total revenue less cost of sales. We define adjusted gross profit as gross profit less royalty revenue sold to a third party, less cost of sales adjustments. We define adjusted gross margin percentage as adjusted gross profit divided by total revenue, less royalty revenue sold to a third party. The following is a reconciliation of GAAP reported gross profit for the three months and years ended December 31, 2025 and 2024, to adjusted gross profit and adjusted gross margin percentage:
Three Months Ended December 31, | Year Ended December 31, | ||||||
2025 | 2024 | 2025 | 2024 | ||||
GAAP reported gross profit | $ 589 | $ 519 | $ 2,593 | $ 2,436 | |||
Sold royalty revenue | (9) | — | (19) | — | |||
Cost of sales adjustments | 1 | — | 2 | — | |||
Adjusted gross profit | $ 581 | $ 519 | $ 2,576 | $ 2,436 | |||
Adjusted gross margin percentage | 51.2 % | 50.9 % | 54.9 % | 54.9 % | |||
Adjusted Net Income and Earnings Per Share
We define adjusted net income as net income (loss) excluding amortization of intangible assets, purchase accounting adjustments to inventory, acquisition and divestiture-related charges, including integration and separation costs, severance, goodwill and other asset impairments, gains on sales of assets and related costs, facility exit costs, the impacts from sales of future revenues, gains and losses on mark-to-market adjustments on equity securities, tax valuation allowances and other specified significant items, such as unusual or non-recurring items that are unrelated to our long-term operations adjusted for income tax expense associated with the excluded financial items. We define adjusted earnings per share as adjusted net income divided by the number of weighted-average diluted shares outstanding for the applicable period. The following is a reconciliation of GAAP reported loss and EPS for three months ended December 31, 2025 and 2024, to adjusted net income and EPS:
Three Months Ended December 31, 2025 | Three Months Ended December 31, 2024 | ||||||
Net (loss) | EPS | Net (loss) | EPS | ||||
GAAP reported net loss and EPS | $ (276) | $ (0.56) | $ (8) | $ (0.02) | |||
Cost of sales adjustments | 1 | 0.00 | — | — | |||
Amortization of intangible assets | 139 | 0.28 | 130 | 0.26 | |||
Asset impairment, restructuring and other | 202 | 0.40 | 7 | 0.02 | |||
Sold royalty revenue | (9) | (0.02) | — | — | |||
Interest expense, net of capitalized interest (2) | 33 | 0.08 | — | — | |||
Other (income) expense, net (3) | — | — | 11 | 0.02 | |||
Income tax expense (benefit) (4) | (26) | (0.05) | (69) | (0.14) | |||
Adjusted net income and EPS (5) | $ 64 | $ 0.13 | $ 72 | $ 0.14 | |||
(a) | Adjustments to GAAP reported net loss to arrive at adjusted net income for the three months ended December 31, 2025 and 2024, included the following: | |
(1) | Adjustments of | |
(2) | Adjustments of | |
(3) | Adjustments of | |
(4) | Adjustments of | |
(5) | During the three months ended December 31, 2025 and 2024, we reported a GAAP net loss and thus, potential dilutive common shares were not assumed to have been issued since their effect was anti-dilutive. During the same periods, we reported non-GAAP net income. As a result, potential dilutive common shares would not have had an anti-dilutive effect, and diluted weighted-average shares outstanding for purposes of calculating adjusted EPS include 8.6 million and 4.0 million, respectively, of common stock equivalents. | |
The following is a reconciliation of GAAP reported net (loss) income and EPS for the years ended December 31, 2025 and 2024, to adjusted net income and EPS:
Year Ended December 31, 2025 | Year Ended December 31, 2024 | ||||||
Net (Loss) | EPS | Net Income (a) | EPS | ||||
GAAP reported net (loss) income and EPS | $ (232) | $ (0.47) | $ 338 | $ 0.68 | |||
Cost of sales adjustments | 2 | 0.00 | — | — | |||
Amortization of intangible assets | 543 | 1.08 | 527 | 1.06 | |||
Asset impairment, restructuring and other special charges (1) | 237 | 0.47 | 150 | 0.30 | |||
Sold royalty revenue | (19) | (0.04) | — | — | |||
Gain on divestiture | — | — | (640) | (1.29) | |||
Interest expense, net of capitalized interest (2) | 61 | 0.12 | 12 | 0.03 | |||
Other expense, net (3) | 5 | 0.01 | 15 | 0.03 | |||
Income tax expense (4) | (124) | (0.23) | 50 | 0.10 | |||
Adjusted net income and EPS (5) | $ 473 | $ 0.94 | $ 452 | $ 0.91 | |||
The table above reflects only line items with non-GAAP adjustments. Numbers may not add due to rounding.
(a) | Adjustments to GAAP reported net (loss) income to arrive at adjusted net income for the years ended December 31, 2025 and 2024, included the following: | |
(1) | Adjustments of | |
(2) | Adjustments of | |
(3) | Adjustments of | |
(4) | Adjustments of | |
(5) | During the year ended December 31, 2025, we reported a GAAP net loss and thus, potential dilutive common shares were not assumed to have been issued since their effect was anti-dilutive. During the same period, we reported non-GAAP net income. As a result, potential dilutive common shares would not have had an anti-dilutive effect, and diluted weighted-average shares outstanding for purposes of calculating adjusted EPS include 6.0 million of common stock equivalents. | |
Adjusted EBITDA and Adjusted EBITDA Margin
We define adjusted EBITDA as net income (loss) adjusted for interest expense (income), which includes debt financing charges and imputed interest on our liability for sale of future revenue, income tax expense (benefit) and depreciation and amortization, further adjusted to exclude purchase accounting adjustments to inventory, acquisition and divestiture-related charges, including integration and separation costs, severance, goodwill and other asset impairments, gains on sales of assets and related costs, facility exit costs, revenue sold to a third party, gains and losses on mark-to-market adjustments on equity securities, and other specified significant items, such as unusual or non-recurring items that are unrelated to our long-term operations.
For the periods presented, we have not made adjustments for all items that may be considered unrelated to our long-term operations. We believe adjusted EBITDA, when used in conjunction with our results presented in accordance with GAAP and its reconciliation to net income (loss), enhances investors' understanding of our performance, valuation and prospects for the future. We also believe adjusted EBITDA is a measure used in the animal health industry by analysts as a valuable performance metric for investors. The following is a reconciliation of GAAP reported net (loss) income for the three months and years ended December 31, 2025 and 2024, to EBITDA, adjusted EBITDA and adjusted EBITDA margin, which we define as adjusted EBITDA divided by total revenue, less royalty revenue sold to a third party, for the respective periods:
Three Months Ended December 31, | Year Ended December 31, | ||||||
2025 | 2024 | 2025 | 2024 | ||||
Reported net (loss) income | $ (276) | $ (8) | $ (232) | $ 338 | |||
Net interest expense | 80 | 46 | 220 | 235 | |||
Income tax expense (benefit) | 17 | (43) | 8 | 150 | |||
Depreciation and amortization | 174 | 164 | 680 | 662 | |||
EBITDA | $ (5) | $ 159 | $ 676 | $ 1,385 | |||
Non-GAAP Adjustments: | |||||||
Cost of sales | $ 1 | $ — | $ 2 | $ — | |||
Asset impairment, restructuring | 202 | 7 | 237 | 150 | |||
Sold royalty revenue | (9) | — | (19) | — | |||
Gain on divestiture | — | — | — | (640) | |||
Other (income) expense, net | — | 11 | 5 | 15 | |||
Adjusted EBITDA | $ 189 | $ 177 | $ 901 | $ 910 | |||
Adjusted EBITDA Margin | 16.7 % | 17.4 % | 19.2 % | 20.5 % | |||
Numbers may not add due to rounding.
Gross and Net Debt and Net Leverage Ratio
We define gross debt as the sum of the current portion of long-term debt and long-term debt excluding unamortized debt issuance costs. We define net debt as gross debt less cash and cash equivalents and finance lease liabilities on the balance sheet. We define our net leverage ratio as net debt divided by our trailing twelve month adjusted EBITDA. We believe our net debt and net leverage ratio are important measures to monitor our financial flexibility, liquidity and capital structure and may enhance investors' understanding of our ability to meet future financial obligations. In addition, a net leverage ratio is a financial measure that is frequently used by investors and creditors. The below calculations do not include covenant-related adjustments that reduce our net leverage ratio. The following is a reconciliation of gross debt to net debt as of December 31, 2025:
Long-term debt | $ 3,943 |
Current portion of long-term debt | 74 |
Less: Unamortized debt issuance costs | (28) |
Total gross debt | 4,045 |
Less: Cash and cash equivalents | 545 |
Less: Finance lease liabilities | 255 |
Net Debt | $ 3,245 |
The following table presents a calculation of our net leverage ratio as of December 31, 2025:
Net debt | $ 3,245 | |
Trailing twelve month adjusted EBITDA | 901 | |
Net leverage ratio | 3.6 |
Investor Contact: Tiffany Kanaga (765) 740-0314 or tiffany.kanaga@elancoah.com
Media Contact: Colleen Parr Dekker (317) 989-7011 or colleen.dekker@elancoah.com
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SOURCE Elanco Animal Health