Elanco Animal Health Inc

Our primary sources of liquidity are cash on hand, cash flows from operations and funds available under our credit facilities. As a significant portion of our business is conducted internationally, we hold a significant portion of cash outside the U.S. We monitor and adjust the amount of foreign cash based on projected cash flow requirements. Our ability to use foreign cash to fund cash flow requirements in the U.S. may be impacted by local regulations and, to a lesser extent, the income taxes associated with transferring cash to the U.S. We intend to indefinitely reinvest substantially all foreign earnings for continued use in our foreign operations. As our business evolves, we may change that strategy, particularly to the extent we identify tax-efficient reinvestment alternatives for our foreign earnings or change our cash management strategy.

We believe our primary sources of liquidity are sufficient to fund our short-term and long-term existing and planned capital requirements, which include working capital obligations, funding existing marketed and pipeline products, capital expenditures, business development in our targeted areas, short-term and long-term debt obligations, including both principal and interest payments, as well as interest rate swaps, lease payments, purchase obligations and costs associated with mergers, acquisitions, divestitures, business integrations and/or restructuring activities. As of September 30, 2025, we had cash and cash equivalents of $505 million and unused borrowing capacity on our Revolving Credit Facility of approximately $750 million. In addition, our Securitization Facility provides for additional borrowing capacity based on our U.S. Net Eligible Receivable Balances. As of September 30, 2025, we had approximately $110 million in undrawn borrowing capacity on this facility. We also have the ability to access capital markets to obtain debt financing for longer-term funding, if required. Further, we believe we have sufficient cash flow and liquidity to remain in compliance with our debt covenants.

On October 31, 2025, we refinanced our previously outstanding Term Loan B due 2027, paying off the $2,102 million balance in full with the proceeds from three new debt facilities and cash on hand. Our new Euro Term Loan, in the amount of €400 million, bears interest at EURIBOR plus a spread dependent on our Net Total Leverage Ratio, which will initially be 1.50%, and is scheduled to mature on April 1, 2029. Our new $1,100 million Term Loan B due 2032 bears interest at Term SOFR plus 1.75% and our new$540 million Incremental Term Facility due 2032 bears interest at Term SOFR plus 2.25%. Both the Term Loan B due 2032 and the Incremental Term Facility due 2032 are scheduled to mature on October 31, 2032. These refinancing activities extend our debt maturity profile and are expected to lower future cash paid for interest. See Note 7. Debt and Finance Lease Liability to the condensed consolidated financial statements for more details.

Our ability to meet future funding requirements may be impacted by macroeconomic, business and financial volatility. As market conditions change, we will continue to monitor our liquidity position. However, a challenging economic environment or an economic downturn may impact our liquidity or ability to obtain future financing. See "Item 1A. Risk Factors –We have substantial indebtedness" in Part I of our 2024 Form 10-K.

Cash Flows

The following table provides a summary of cash flows from operating, investing and financing activities for the nine months ended September 30, 2025 and 2024:

2025 Q3 Form 10-Q | 27

Operating activities

Cash provided by operating activities was $452 million for the nine months ended September 30, 2025, compared to $364 million for the nine months ended September 30, 2024. The increase in cash provided by operating activities was primarily driven by increased net income year-over-year, after excluding the prior year gain on divestiture of our aqua business, as the related cash receipts associated with that divestiture were included within investing activities. This increase in net income was partially offset by changes in working capital.

Investing activities

Cash used for investing activities was $215 million for the nine months ended September 30, 2025, compared to cash provided by investing activities of $1,248 million for the nine months ended September 30, 2024. Cash used for investing activities during the nine months ended September 30, 2025, largely consisted of $214 million of net purchases of property and equipment and software, which was $114 million higher than for the nine months ended September 30, 2024. This increase in purchases of property and equipment primarily related to the ongoing expansion of our monoclonal antibody manufacturing facility in Elwood, Kansas, as well as capital projects at our Fort Dodge, Iowa, and Huningue, France, manufacturing facilities. Additionally, in August 2025 we purchased approximately 56 acres of land to further our vision of creating the One Health Innovation District research hub centered around our new corporate headquarters in Indianapolis, Indiana.

Cash provided by investing activities during the nine months ended September 30, 2024, was driven by the cash proceeds of $1,294 million from the sale of our aqua business in July 2024, and to a lesser extent, the collection of a $66 million receivable related to the previous divestiture of our Shawnee and Speke locations (see Note 4. Acquisitions, Divestitures and Other Arrangements to the condensed consolidated financial statements for additional information). These proceeds were partially offset by net purchases of property and equipment and software.

Financing activities

Cash used for financing activities was $257 million for the nine months ended September 30, 2025, compared to $1,460 million for the nine months ended September 30, 2024. Cash used for financing activities during the nine months ended September 30, 2025, included $562 million in scheduled and early repayments of long-term borrowings, partially enabled by net proceeds of $290 million from the sale of qualifying future royalties and sales milestone payments (see Note 10. Liability for Sale of Future Revenue to the condensed consolidated financial statements for further information). Cash used for financing activities during the nine months ended September 30, 2024, included $1,587 million in gross repayments of term loan debt, partially enabled by the proceeds from the sale of our aqua business, and net repayments on our Revolving Credit Facility of $200 million. These repayments were partially offset by proceeds of $350 million from the issuance of our Incremental Term Facility due 2031 in August 2024.

Description of Indebtedness

For a complete description of our existing debt and available credit facilities as of September 30, 2025 and December 31, 2024, see Note 8. Debt within Item 8, “Financial Statements and Supplementary Data,” of Part II of our 2024 Form 10-K. New developments, including our October 2025 refinancing of our Term Loan B due 2027, are discussed in Note 7. Debt and Finance Lease Liability of this Form 10-Q.

Critical Accounting Estimates

The preparation of financial statements in accordance with GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures at the date of the financial statements and during the reporting period. Certain of our accounting estimates are considered critical because they are the most important to the fair presentation of our financial statements, including the disclosures thereto, and often require significant, difficult or complex judgments, probabilities and assumptions.

While we believe our critical accounting estimates to be reasonable based on all relevant information available, given their inherent uncertainty, if our estimates and assumptions are not representative of actual outcomes, our results could be materially impacted. We regularly evaluate our estimates and assumptions and adjust them when facts and circumstances indicate the need for change, and such changes generally would be reflected in our condensed consolidated financial statements in the period they are determined. We apply estimation methodologies consistently from year to year. Our critical accounting estimates are summarized in Item 7, "Management's Discussion & Analysis of Results of Financial Condition and Results of Operations," of our 2024 Form 10-K. There were no significant changes or developments in the application of our critical accounting estimates during the nine months ended September 30, 2025.

2025 Q3 Form 10-Q | 28