- For Fourth Quarter 2022, Zoetis Reports Revenue of $2.0
Billion, Growing 4%, and Net Income of $461 Million, or $0.99 per
Diluted Share, on a Reported Basis
- Delivers 9% Operational Growth in Revenue and 27%
Operational Growth in Adjusted Net Income for Fourth Quarter
2022
- Reports Adjusted Net Income of $539 Million, or Adjusted
Diluted EPS of $1.15, for Fourth Quarter 2022
- For Full Year 2022, Zoetis Reports Revenue of $8.1 Billion,
Growing 4%, and Net Income of $2.1 Billion, or $4.49 per Diluted
Share, on a Reported Basis
- Delivers 8% Operational Growth in Revenue and 11%
Operational Growth in Adjusted Net Income for Full Year
2022
- Reports Adjusted Net Income of $2.3 Billion, or Adjusted
Diluted EPS of $4.88 for Full Year 2022
- Provides Full Year 2023 Revenue Guidance of $8.575 - $8.725
Billion, with Diluted EPS of $5.03 to $5.14 on a Reported Basis, or
$5.34 to $5.44 on an Adjusted Basis
- Expects to Deliver 6% to 8% Operational Growth in
Revenue
Zoetis Inc. (NYSE:ZTS) today reported its financial results for
the fourth quarter and full year 2022 and provided full year
guidance for 2023.
The company reported revenue of $2.0 billion for the fourth
quarter of 2022, which was an increase of 4% compared with the
fourth quarter of 2021. On an operational1 basis, revenue for the
fourth quarter of 2022 increased 9% compared with the fourth
quarter of 2021, excluding the impact of foreign currency. Net
income for the fourth quarter of 2022 was $461 million, or $0.99
per diluted share, an increase of 11% and 14%, respectively, on a
reported basis.
Adjusted net income for the fourth quarter of 2022 was $539
million, or $1.15 per diluted share, an increase of 14% and 15%,
respectively, on a reported basis. Adjusted net income for the
fourth quarter of 2022 excludes the net impact of $78 million for
purchase accounting adjustments, acquisition-related costs and
certain significant items. Adjusted net income2 for the fourth
quarter of 2022 increased 27% operationally, excluding the impact
from foreign currency.
For full year 2022, the company reported revenue of $8.1
billion, an increase of 4% compared with full year 2021. On an
operational basis, revenue for full year 2022 increased 8%,
excluding the impact of foreign currency. Net income for full year
2022 was $2.1 billion, or $4.49 per diluted share, an increase of
4% and 5%, respectively, on a reported basis.
Adjusted net income for full year 2022 was $2.3 billion, or
$4.88 per diluted share, an increase of 3% and 4%, respectively, on
a reported basis. Adjusted net income for full year 2022 excludes
the net impact of $183 million for purchase accounting adjustments,
acquisition-related costs and certain significant items. Adjusted
net income for full year 2022 increased 11% operationally,
excluding the impact of foreign currency.
EXECUTIVE COMMENTARY
“In 2022, Zoetis delivered another strong year of performance
thanks to our diverse portfolio, global scale and talented
colleagues,” said Kristin Peck, Chief Executive Officer of Zoetis.
“We grew revenue 8% operationally, driven by our innovative
companion animal franchises across parasiticides, dermatology and
pain. We also grew our adjusted net income faster than sales for
the year, at 11% operationally, while continuing to support
investments in R&D, manufacturing capacity, and sales and
marketing efforts that will drive future growth."
"Looking ahead, we are well-positioned with the strategy and
capabilities to expand in large and growing product areas like
parasiticides, dermatology products, monoclonal antibodies,
vaccines and diagnostics, while still investing in comprehensive
solutions across the continuum of animal care. We are committed to
continuing our track record of value creation and above-market
performance even in the face of today’s economic uncertainty, and
we are guiding to full-year operational growth of 6% to 8% in
revenue in 2023," said Peck.
QUARTERLY HIGHLIGHTS
Zoetis organizes and manages its commercial operations across
two regional segments: the United States (U.S.) and International.
Within these segments, the company delivers a diverse portfolio of
products for companion animals and livestock tailored to local
trends and customer needs. In the fourth quarter of 2022:
- Revenue in the U.S. segment was $1.112 billion, an
increase of 7% compared with the fourth quarter of 2021. Sales of
companion animal products increased 12%, driven by growth in the
company’s parasiticide portfolio, primarily Simparica Trio® for
dogs. The company’s key dermatology portfolio also contributed to
growth across both the Apoquel® and Cytopoint® brands. Sales of
livestock products declined 6% in the quarter. Sales of cattle
products declined as a result of supply re-stocking in the third
quarter of 2022 and generic competition for Draxxin®. The company’s
poultry portfolio declined due to the expanded use of lower cost
alternatives and generic competition for Zoamix®, the company’s
alternative to antibiotics in medicated feed additives. Sales of
swine products also decreased modestly in the quarter.
- Revenue in the International segment was $901 million,
essentially flat on a reported basis and an increase of 12%
operationally compared with the fourth quarter of 2021. Sales of
companion animal products grew 7% on a reported basis and 21%
operationally. Contributing to growth in the quarter was the
company’s parasiticide portfolio, primarily Revolution® and
Simparica®, as well as key dermatology products including the
recently launched chewable version of Apoquel. Also contributing to
growth in the quarter were the company’s monoclonal antibody
products for osteoarthritis pain, Librela® for dogs and Solensia®
for cats. Sales of livestock products declined 7% on a reported
basis and increased 4% operationally. Growth in the company’s fish
portfolio was the result of increased sales of vaccines across key
salmon markets, including Norway and Chile. Sales of the company’s
poultry portfolio grew due to market expansion and demand
generation efforts in several key geographies, while sales of sheep
products grew due to the acquisition of Jurox in Australia. Growth
in fish, poultry and sheep was partially offset by reduced sales in
the company’s swine and cattle portfolios due primarily to supply
constraints.
INVESTMENTS IN GROWTH
Zoetis continues to grow key product franchises through new
product approvals and incremental claim extensions. On the
companion animal side of the business, Simparica Trio
(sarolaner/moxidectin/pyrantel) received approval in the European
Union (EU) and the U.K. for additional claims related to faster
kill time of ticks. In livestock, Fostera® Gold PCV MH, a
one-shot vaccine for pigs that offers the longest lasting combined
protection against porcine circovirus type 2 (PCV2) and Mycoplasma
hyopneumoniae infections, was approved for use in pregnant gilts
and sows in the U.S., EU and Canada, expanding its original
claims.
In Canada, the company’s fifth largest market by revenue in
2022, Zoetis gained approvals for two key livestock products:
Protivity®, the first modified live vaccine to offer
protection against Mycoplasma bovis, providing cattle producers and
veterinarians with broader overall protection against bovine
respiratory disease (BRD), as well as Poulvac® Procerta®
HVT-IBD-ND, a part of the company’s recombinant vector vaccine
portfolio for poultry, which provides early, robust protection
against Marek’s, infectious bursal and Newcastle disease viruses
with one dose.
In Diagnostics, Zoetis expanded its multi-purpose Vetscan
Imagyst™ platform in the U.S. to include new applications for
artificial intelligence (AI) dermatology and AI equine Fecal Egg
Count (FEC) analysis. These additions broaden the platform’s
testing capabilities for veterinarians, redefining what is possible
for veterinary diagnosis and animal care across species.
FINANCIAL GUIDANCE
Zoetis is providing full year 2023 guidance, which includes:
- Revenue between $8.575 billion to $8.725 billion (operational
growth of 6% to 8%)
- Reported net income between $2.345 billion to $2.400
billion
- Adjusted net income between $2.490 billion to $2.540 billion
(operational growth of 7% to 9%)
- Reported diluted EPS between $5.03 to $5.14
- Adjusted diluted EPS between $5.34 to $5.44
This guidance reflects foreign exchange rates as of late
January. Additional details on guidance are included in the
financial tables and will be discussed on the company's conference
call this morning.
WEBCAST & CONFERENCE CALL
DETAILS
Zoetis will host a webcast and conference call at 8:30 a.m. (ET)
today, during which company executives will review fourth quarter
and full year 2022 results, discuss financial guidance and respond
to questions from financial analysts. Investors and the public may
access the live webcast by visiting the Zoetis website at
http://investor.zoetis.com/events-presentations. A
replay of the webcast will be archived and made available on
February 14, 2023.
About Zoetis
As the world’s leading animal health company, Zoetis is driven
by a singular purpose: to nurture our world and humankind by
advancing care for animals. After innovating ways to predict,
prevent, detect, and treat animal illness for more than 70 years,
Zoetis continues to stand by those raising and caring for animals
worldwide – from veterinarians and pet owners to livestock farmers
and ranchers. The company’s leading portfolio and pipeline of
medicines, vaccines, diagnostics and technologies make a difference
in over 100 countries. A Fortune 500 company, Zoetis generated
revenue of $8.1 billion in 2022 with approximately 13,800
employees. For more information, visit www.zoetis.com.
1 Operational growth (a non-GAAP financial measure) is defined
as growth excluding the impact of foreign exchange.
2 Adjusted net income and its components and adjusted diluted
earnings per share (non-GAAP financial measures) are defined as
reported net income and reported diluted earnings per share,
excluding purchase accounting adjustments, acquisition-related
costs and certain significant items.
DISCLOSURE NOTICES
Forward-Looking Statements: This
press release contains forward-looking statements, which reflect
the current views of Zoetis with respect to: business plans or
prospects, future operating or financial performance, future
guidance, future operating models; disruptions in our global supply
chain; the impact of the coronavirus (COVID-19) global pandemic and
any recovery therefrom on our business, supply chain, customers and
employees; R&D costs; timing and likelihood of success;
expectations regarding products, product approvals or products
under development and expected timing of product launches;
expectations regarding the performance of acquired companies and
our ability to integrate new businesses; expectations regarding the
financial impact of acquisitions; future use of cash, dividend
payments and share repurchases; tax rate and tax regimes and any
changes thereto; and other future events. These statements are not
guarantees of future performance or actions. Forward-looking
statements are subject to risks and uncertainties. If one or more
of these risks or uncertainties materialize, or if management's
underlying assumptions prove to be incorrect, actual results may
differ materially from those contemplated by a forward-looking
statement. Forward-looking statements speak only as of the date on
which they are made. Zoetis expressly disclaims any obligation to
update or revise any forward-looking statement, whether as a result
of new information, future events or otherwise. A further list and
description of risks, uncertainties and other matters can be found
in our most recent Annual Report on Form 10-K, including in the
sections thereof captioned “Forward-Looking Statements and Factors
That May Affect Future Results” and “Item 1A. Risk Factors,” in our
Quarterly Reports on Form 10-Q and in our Current Reports on Form
8-K. These filings and subsequent filings are available online at
www.sec.gov, www.zoetis.com, or on request from Zoetis.
Use of Non-GAAP Financial Measures:
We use non-GAAP financial measures, such as adjusted net income,
adjusted diluted earnings per share and operational results (which
exclude the impact of foreign exchange), to assess and analyze our
results and trends and to make financial and operational decisions.
We believe these non-GAAP financial measures are also useful to
investors because they provide greater transparency regarding our
operating performance. The non-GAAP financial measures included in
this press release should not be considered alternatives to
measurements required by GAAP, such as net income, operating
income, and earnings per share, and should not be considered
measures of liquidity. These non-GAAP financial measures are
unlikely to be comparable with non-GAAP information provided by
other companies. Reconciliations of non-GAAP financial measures and
the most directly comparable GAAP financial measures are included
in the tables accompanying this press release and are posted on our
website at www.zoetis.com.
Internet Posting of Information: We
routinely post information that may be important to investors in
the 'Investors' section of our website at www.zoetis.com, on our Facebook page at
http://www.facebook.com/zoetis and on
Twitter@zoetis. We encourage investors
and potential investors to consult our website regularly and to
follow us on Facebook and Twitter for important information about
us.
ZTS-COR
ZTS-IR
ZTS-FIN
ZOETIS INC.
CONDENSED CONSOLIDATED STATEMENTS
OF INCOME(a)
(UNAUDITED)
(millions of dollars, except per
share data)
Three Months Ended December
31,
% Change
Twelve Months Ended December
31,
% Change
2022
2021
2022
2021
Revenue
$ 2,040
$ 1,967
4
$ 8,080
$ 7,776
4
Costs and expenses:
Cost of sales
653
600
9
2,454
2,303
7
Selling, general and administrative
expenses
514
593
(13)
2,009
2,001
—
Research and development expenses
148
138
7
539
508
6
Amortization of intangible assets
35
40
(13)
150
161
(7)
Restructuring charges and certain
acquisition-related costs
2
4
(50)
11
43
(74)
Interest expense
62
54
15
221
224
(1)
Other (income)/deductions–net
34
32
6
40
48
(17)
Income before provision for taxes on
income
592
506
17
2,656
2,488
7
Provision for taxes on income
132
93
42
545
454
20
Net income before allocation to
noncontrolling interests
460
413
11
2,111
2,034
4
Less: Net loss attributable to
noncontrolling interests
(1)
(1)
—
(3)
(3)
—
Net income attributable to Zoetis
$ 461
$ 414
11
$ 2,114
$ 2,037
4
Earnings per share—basic
$ 0.99
$ 0.88
13
$ 4.51
$ 4.29
5
Earnings per share—diluted
$ 0.99
$ 0.87
14
$ 4.49
$ 4.27
5
Weighted-average shares used to calculate
earnings per share
Basic
465.6
473.1
468.9
474.3
Diluted
466.8
475.6
470.4
476.7
(a) The Condensed Consolidated Statements
of Income present the three and twelve months ended December 31,
2022 and 2021. Subsidiaries operating outside the U.S. are included
for the three and twelve months ended November 30, 2022 and
2021.
ZOETIS INC.
RECONCILIATION OF GAAP REPORTED
TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions of dollars, except per
share data)
Three Months Ended December 31,
2022
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
653
$
(3
)
$
—
$
—
$
650
Gross profit
1,387
3
—
—
1,390
Selling, general and administrative
expenses
514
(7
)
—
—
507
Research and development expenses
148
(1
)
—
—
147
Amortization of intangible assets
35
(29
)
—
—
6
Restructuring charges and certain
acquisition-related costs
2
—
(1
)
(1
)
—
Other (income)/deductions–net
34
—
—
(45
)
(11
)
Income before provision for taxes on
income
592
40
1
46
679
Provision for taxes on income
132
12
—
(3
)
141
Net income attributable to Zoetis
461
28
1
49
539
Earnings per common share attributable to
Zoetis–diluted
0.99
0.06
—
0.10
1.15
Three Months Ended December 31,
2021
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
600
$
(1
)
$
—
$
(1
)
$
598
Gross profit
1,367
1
—
1
1,369
Selling, general and administrative
expenses
593
(7
)
—
—
586
Amortization of intangible assets
40
(34
)
—
—
6
Restructuring charges and certain
acquisition-related costs
4
—
(4
)
—
—
Other (income)/deductions–net
32
—
—
(28
)
4
Income before provision for taxes on
income
506
42
4
29
581
Provision for taxes on income
93
9
1
5
108
Net income attributable to Zoetis
414
33
3
24
474
Earnings per common share attributable to
Zoetis–diluted
0.87
0.07
0.01
0.05
1.00
(a) The Condensed Consolidated Statements
of Income present the three months ended December 31, 2022 and
2021. Subsidiaries operating outside the U.S. are included for the
three months ended November 30, 2022 and 2021.
(b) Non-GAAP adjusted net income and its
components and non-GAAP adjusted diluted EPS are not, and should
not be viewed as, substitutes for U.S. GAAP net income and its
components and diluted EPS. Despite the importance of these
measures to management in goal setting and performance measurement,
non-GAAP adjusted net income and its components and non-GAAP
adjusted diluted EPS are non-GAAP financial measures that have no
standardized meaning prescribed by U.S. GAAP and, therefore, have
limits in their usefulness to investors. Because of the
non-standardized definitions, non-GAAP adjusted net income and its
components and non-GAAP adjusted diluted EPS (unlike U.S. GAAP net
income and its components and diluted EPS) may not be comparable to
the calculation of similar measures of other companies. Non-GAAP
adjusted net income and its components, and non-GAAP adjusted
diluted EPS are presented solely to permit investors to more fully
understand how management assesses performance.
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted
Information for notes (1) and (2).
ZOETIS INC.
RECONCILIATION OF GAAP REPORTED
TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions of dollars, except per
share data)
Twelve Months Ended December 31,
2022
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
2,454
$
(6
)
$
—
$
(8
)
$
2,440
Gross profit
5,626
6
—
8
5,640
Selling, general and administrative
expenses
2,009
(29
)
—
—
1,980
Research and development expenses
539
(1
)
—
—
538
Amortization of intangible assets
150
(124
)
—
—
26
Restructuring charges and certain
acquisition-related costs
11
—
(5
)
(6
)
—
Other (income)/deductions–net
40
—
—
(42
)
(2
)
Income before provision for taxes on
income
2,656
160
5
56
2,877
Provision for taxes on income
545
40
1
(3
)
583
Net income attributable to Zoetis
2,114
120
4
59
2,297
Earnings per common share attributable to
Zoetis–diluted
4.49
0.26
0.01
0.12
4.88
Twelve Months Ended December 31,
2021
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
2,303
$
(6
)
$
—
$
(8
)
$
2,289
Gross profit
5,473
6
—
8
5,487
Selling, general and administrative
expenses
2,001
(30
)
—
—
1,971
Research and development expenses
508
(1
)
—
—
507
Amortization of intangible assets
161
(138
)
—
—
23
Restructuring charges and certain
acquisition-related costs
43
—
(12
)
(31
)
—
Other (income)/deductions–net
48
—
—
(34
)
14
Income before provision for taxes on
income
2,488
175
12
73
2,748
Provision for taxes on income
454
39
2
16
511
Net income attributable to Zoetis
2,037
136
10
57
2,240
Earnings per common share attributable to
Zoetis–diluted
4.27
0.29
0.02
0.12
4.70
(a) The Condensed Consolidated Statements
of Income present the twelve months ended December 31, 2022 and
2021. Subsidiaries operating outside the U.S. are included for the
twelve months ended November 30, 2022 and 2021.
(b) Non-GAAP adjusted net income and its
components and non-GAAP adjusted diluted EPS are not, and should
not be viewed as, substitutes for U.S. GAAP net income and its
components and diluted EPS. Despite the importance of these
measures to management in goal setting and performance measurement,
non-GAAP adjusted net income and its components and non-GAAP
adjusted diluted EPS are non-GAAP financial measures that have no
standardized meaning prescribed by U.S. GAAP and, therefore, have
limits in their usefulness to investors. Because of the
non-standardized definitions, non-GAAP adjusted net income and its
components and non-GAAP adjusted diluted EPS (unlike U.S. GAAP net
income and its components and diluted EPS) may not be comparable to
the calculation of similar measures of other companies. Non-GAAP
adjusted net income and its components, and non-GAAP adjusted
diluted EPS are presented solely to permit investors to more fully
understand how management assesses performance.
See Notes to Reconciliation of GAAP
Reported to Non-GAAP Adjusted Information for notes (1) and
(2).
ZOETIS INC.
NOTES TO RECONCILIATION OF GAAP
REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions of dollars)
(1) Acquisition-related costs include the following:
Three Months Ended December
31,
Twelve Months Ended December
31,
2022
2021
2022
2021
Transaction costs(a)
$
1
$
—
$
1
$
—
Integration costs(b)
—
4
4
10
Restructuring charges(c)
—
—
—
2
Total acquisition-related
costs—pre-tax
1
4
5
12
Income taxes(d)
—
1
1
2
Total acquisition-related costs—net of
tax
$
1
$
3
$
4
$
10
(a) Represents external costs directly
related to acquiring businesses and primarily includes expenditures
for banking, legal, accounting and other similar services. Included
in Restructuring charges and certain acquisition-related costs.
(b) Integration costs represent external, incremental costs
directly related to integrating acquired businesses and primarily
include expenditures for consulting and the integration of systems
and processes. Included in Restructuring charges and certain
acquisition-related costs.
(c) Represents exit and employee
termination costs, included in Restructuring charges and certain
acquisition-related costs.
(d) Included in Provision for taxes on
income. Income taxes include the tax effect of the associated
pre-tax amounts, calculated by determining the jurisdictional
location of the pre-tax amounts and applying that jurisdiction's
applicable tax rate.
(2) Certain significant items include the
following:
Three Months Ended December
31,
Twelve Months Ended December
31,
2022
2021
2022
2021
Other restructuring charges and
cost-reduction/productivity initiatives(a)
$
1
$
2
$
8
$
24
Certain asset impairment charges(b)
41
27
47
46
Net loss on sale of assets(c)
—
—
—
3
Other
4
—
1
—
Total certain significant
items—pre-tax
46
29
56
73
Income taxes(d)
(3
)
5
(3
)
16
Total certain significant items—net of
tax
$
49
$
24
$
59
$
57
(a) For the twelve months ended December
31, 2022, primarily represents employee termination and exit costs
associated with cost-reduction and productivity initiatives in
certain international markets, included in Restructuring charges
and certain acquisition-related costs, as well as product transfer
costs, included in Cost of sales.
For the twelve months ended December 31,
2021, primarily represents employee termination costs associated
with the realignment of our international operations and other
costs associated with cost-reduction and productivity initiatives,
included in Restructuring charges and certain acquisition-related
costs.
(b) For the three and twelve months ended
December 31, 2022, primarily represents asset impairment charges
related to customer relationships, developed technology rights and
property, plant and equipment in our diagnostics, poultry, cattle
and swine businesses included in Other (income)/deductions-net.
For the twelve months ended December 31,
2022, also includes inventory and certain asset impairment charges
related to the consolidation of manufacturing sites in China,
included in Cost of sales and Restructuring charges and certain
acquisition related costs.
For the three months ended December 31,
2021, represents asset impairment charges related to developed
technology rights and trademarks in our dairy cattle, diagnostics
and aquatic health businesses, included in Other
(income)/deductions-net.
For the twelve months ended December 31,
2021, primarily represents asset impairment charges related to:
- Developed technology rights and trademarks in our dairy cattle,
diagnostics and aquatic health businesses, included in Other
(income)/deductions-net;
- The consolidation of manufacturing sites in China, included in
Restructuring charges and certain acquisition related costs;
and
- Property, plant and equipment and inventory related to a dairy
product termination included in Other (income)/deductions-net and
Cost of sales.
(c) Represents a net loss related to the
sale of certain assets of our poultry automation business located
in the U.S. and Canada, included in Other
(income)/deductions-net.
(d) Included in Provision for taxes on
income. Income taxes include the tax effect of the associated
pre-tax amounts, calculated by determining the jurisdictional
location of the pre-tax amounts and applying that jurisdiction's
applicable tax rate. For the twelve months ended December 31, 2022,
also includes a tax charge related to changes in valuation
allowances related to impairment of certain assets and changes in
uncertain tax positions.
ZOETIS INC.
ADJUSTED SELECTED COSTS AND
EXPENSES(a)
(UNAUDITED)
(millions of dollars)
Three Months Ended December
31,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
650
$
598
9
%
(2
) %
11
%
As a percent of revenue
31.9
%
30.4
%
NA
NA
NA
Adjusted SG&A expenses
507
586
(13
) %
(4
) %
(9
) %
Adjusted R&D expenses
147
138
7
%
(3
) %
10
%
Adjusted net income attributable to
Zoetis
539
474
14
%
(13
) %
27
%
Twelve Months Ended December
31,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
2,440
$
2,289
7
%
(1
) %
8
%
As a percent of revenue
30.2
%
29.4
%
NA
NA
NA
Adjusted SG&A expenses
1,980
1,971
—
%
(3
) %
3
%
Adjusted R&D expenses
538
507
6
%
(2
) %
8
%
Adjusted net income attributable to
Zoetis
2,297
2,240
3
%
(8
) %
11
%
(a) Adjusted cost of sales, adjusted
selling, general, and administrative (SG&A) expenses, adjusted
research and development (R&D) expenses, and adjusted net
income (non-GAAP financial measures) are defined as the
corresponding reported U.S. GAAP income statement line items
excluding purchase accounting adjustments, acquisition-related
costs, and certain significant items. These adjusted income
statement line item measures are not, and should not be viewed as,
substitutes for the corresponding U.S. GAAP line items. The
corresponding GAAP line items and reconciliations of reported to
adjusted information are provided in Condensed Consolidated
Statements of Income and Reconciliation of GAAP Reported to
Non-GAAP Adjusted Information.
(b) Operational growth (a non-GAAP
financial measure) is defined as growth excluding the impact of
foreign exchange.
ZOETIS INC.
2023 GUIDANCE
Selected Line Items
(millions of dollars, except per share
amounts)
Full Year 2023
Revenue
$8,575 to $8,725
Operational growth(a)
6% to 8%
Adjusted cost of sales as a percentage of
revenue(b)
29.5% to 30.0%
Adjusted SG&A expenses(b)
$2,060 to $2,100
Adjusted R&D expenses(b)
$635 to $660
Adjusted interest expense and other
(income)/deductions-net(b)
Approximately $170
Effective tax rate on adjusted
income(b)
20.0% to 21.0%
Adjusted diluted EPS(b)
$5.34 to $5.44
Adjusted net income(b)
$2,490 to $2,540
Operational growth(a)(c)
7% to 9%
Certain significant items and
acquisition-related costs(d)
$20 - $25
The guidance reflects foreign exchange
rates as of late January.
Reconciliations of 2023 reported guidance
to 2023 adjusted guidance follows:
(millions of dollars, except per
share amounts)
Reported
Certain significant items and
acquisition-related costs(d)
Purchase accounting
Adjusted(b)
Cost of sales as a percentage of
revenue
29.7% to 30.2%
~ (0.1%)
~ (0.1%)
29.5% to 30.0%
SG&A expenses
$2,090 to $2,130
~ $(30)
$2,060 to $2,100
R&D expenses
$636 to $661
~ $(1)
$635 to $660
Interest expense and other
(income)/deductions
~ $170
~ $170
Effective tax rate
20.0% to 21.0%
20.0% to 21.0%
Diluted EPS
$5.03 to $5.14
$0.04 - $0.05
~ $0.26
$5.34 to $5.44
Net income attributable to Zoetis
$2,345 to $2,400
$20 - $25
~ $120
$2,490 to $2,540
(a) Operational growth (a non-GAAP
financial measure) excludes the impact of foreign exchange.
(b) Adjusted net income and its components
and adjusted diluted EPS are defined as reported U.S. GAAP net
income and its components and reported diluted EPS excluding
purchase accounting adjustments, acquisition-related costs and
certain significant items. Adjusted cost of sales, adjusted
SG&A expenses, adjusted R&D expenses, and adjusted interest
expense and other (income)/deductions-net are income statement line
items prepared on the same basis, and, therefore, components of the
overall adjusted income measure. Despite the importance of these
measures to management in goal setting and performance measurement,
adjusted net income and its components and adjusted diluted EPS are
non-GAAP financial measures that have no standardized meaning
prescribed by U.S. GAAP and, therefore, have limits in their
usefulness to investors. Because of the non-standardized
definitions, adjusted net income and its components and adjusted
diluted EPS (unlike U.S. GAAP net income and its components and
diluted EPS) may not be comparable to the calculation of similar
measures of other companies. Adjusted net income and its components
and adjusted diluted EPS are presented solely to permit investors
to more fully understand how management assesses performance.
Adjusted net income and its components and adjusted diluted EPS are
not, and should not be viewed as, substitutes for U.S. GAAP net
income and its components and diluted EPS.
(c) We do not provide a reconciliation of
forward-looking non-GAAP adjusted net income operational growth to
the most directly comparable U.S. GAAP reported financial measure
because we are unable to calculate with reasonable certainty the
foreign exchange impact of unusual gains and losses,
acquisition-related expenses, potential future asset impairments
and other certain significant items, without unreasonable effort.
The foreign exchange impacts of these items are uncertain, depend
on various factors, and could have a material impact on U.S. GAAP
reported results for the guidance period.
(d) Primarily includes certain
nonrecurring costs related to acquisitions and other charges.
ZOETIS INC.
CONSOLIDATED REVENUE BY
SEGMENT(a) AND SPECIES
(UNAUDITED)
(millions of dollars)
Three Months Ended December
31,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
Revenue:
Companion Animal
$
1,303
$
1,182
10
%
(5
) %
15
%
Livestock
710
760
(7
) %
(7
) %
—
%
Contract Manufacturing & Human
Health
27
25
8
%
(4
) %
12
%
Total Revenue
$
2,040
$
1,967
4
%
(5
) %
9
%
U.S.
Companion Animal
$
853
$
763
12
%
—
%
12
%
Livestock
259
277
(6
) %
—
%
(6
) %
Total U.S. Revenue
$
1,112
$
1,040
7
%
—
%
7
%
International
Companion Animal
$
450
$
419
7
%
(14
) %
21
%
Livestock
451
483
(7
) %
(11
) %
4
%
Total International Revenue
$
901
$
902
—
%
(12
) %
12
%
Companion Animal:
Dogs and Cats
$
1,224
$
1,107
11
%
(4
) %
15
%
Horses
79
75
5
%
(6
) %
11
%
Total Companion Animal Revenue
$
1,303
$
1,182
10
%
(5
) %
15
%
Livestock:
Cattle
$
377
$
413
(9
) %
(5
) %
(4
) %
Swine
138
155
(11
) %
(8
) %
(3
) %
Poultry
115
118
(3
) %
(6
) %
3
%
Fish
61
55
11
%
(14
) %
25
%
Sheep and other
19
19
—
%
(14
) %
14
%
Total Livestock Revenue
$
710
$
760
(7
) %
(7
) %
—
%
(a) For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b) Operational revenue growth (a non-GAAP
financial measure) is defined as revenue growth excluding the
impact of foreign exchange.
ZOETIS INC.
CONSOLIDATED REVENUE BY
SEGMENT(a) AND SPECIES
(UNAUDITED)
(millions of dollars)
Twelve Months Ended December
31,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
Revenue:
Companion Animal
$
5,203
$
4,689
11
%
(3
) %
14
%
Livestock
2,791
3,005
(7
) %
(5
) %
(2
) %
Contract Manufacturing & Human
Health
86
82
5
%
(2
) %
7
%
Total Revenue
$
8,080
$
7,776
4
%
(4
) %
8
%
U.S.
Companion Animal
$
3,341
$
2,990
12
%
—
%
12
%
Livestock
972
1,052
(8
) %
—
%
(8
) %
Total U.S. Revenue
$
4,313
$
4,042
7
%
—
%
7
%
International
Companion Animal
$
1,862
$
1,699
10
%
(9
) %
19
%
Livestock
1,819
1,953
(7
) %
(7
) %
—
%
Total International Revenue
$
3,681
$
3,652
1
%
(8
) %
9
%
Companion Animal:
Dogs and Cats
$
4,939
$
4,426
12
%
(3
) %
15
%
Horses
264
263
—
%
(4
) %
4
%
Total Companion Animal Revenue
$
5,203
$
4,689
11
%
(3
) %
14
%
Livestock:
Cattle
$
1,440
$
1,557
(8
) %
(5
) %
(3
) %
Swine
565
659
(14
) %
(4
) %
(10
) %
Poultry
476
507
(6
) %
(4
) %
(2
) %
Fish
212
187
13
%
(9
) %
22
%
Sheep and other
98
95
3
%
(9
) %
12
%
Total Livestock Revenue
$
2,791
$
3,005
(7
) %
(5
) %
(2
) %
(a) For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b) Operational revenue growth (a non-GAAP
financial measure) is defined as revenue growth excluding the
impact of foreign exchange.
ZOETIS INC.
CONSOLIDATED REVENUE BY KEY
INTERNATIONAL MARKETS
(UNAUDITED)
(millions of dollars)
Three Months Ended December
31,
% Change
2022
2021
Total
Foreign Exchange
Operational(a)
Total International
$
901.3
$
902.3
—
%
(12
) %
12
%
Australia
64.2
62.8
2
%
(13
) %
15
%
Brazil
96.2
84.1
14
%
4
%
10
%
Canada
65.2
63.0
3
%
(8
) %
11
%
Chile
34.8
36.1
(4
) %
(5
) %
1
%
China
91.4
68.4
34
%
(14
) %
48
%
France
35.1
34.7
1
%
(16
) %
17
%
Germany
44.0
48.0
(8
) %
(14
) %
6
%
Italy
25.6
27.9
(8
) %
(14
) %
6
%
Japan
36.1
46.3
(22
) %
(21
) %
(1
) %
Mexico
35.6
34.8
2
%
3
%
(1
) %
Spain
21.3
31.1
(32
) %
(12
) %
(20
) %
United Kingdom
60.3
61.2
(1
) %
(18
) %
17
%
Other Developed
114.6
117.1
(2
) %
(16
) %
14
%
Other Emerging
176.9
186.8
(5
) %
(14
) %
9
%
Twelve Months Ended December
31,
% Change
2022
2021
Total
Foreign Exchange
Operational(a)
Total International
$
3,680.8
$
3,651.9
1
%
(8
) %
9
%
Australia
288.7
258.8
12
%
(9
) %
21
%
Brazil
329.5
311.5
6
%
3
%
3
%
Canada
237.5
231.5
3
%
(3
) %
6
%
Chile
141.1
136.3
4
%
(4
) %
8
%
China
382.4
357.3
7
%
(4
) %
11
%
France
126.1
132.4
(5
) %
(12
) %
7
%
Germany
176.3
183.0
(4
) %
(12
) %
8
%
Italy
111.2
115.2
(3
) %
(11
) %
8
%
Japan
173.1
186.2
(7
) %
(16
) %
9
%
Mexico
136.2
132.6
3
%
—
%
3
%
Spain
117.8
127.7
(8
) %
(11
) %
3
%
United Kingdom
234.5
234.4
—
%
(11
) %
11
%
Other Developed
468.4
467.0
—
%
(11
) %
11
%
Other Emerging
758.0
778.0
(3
) %
(12
) %
9
%
(a) Operational revenue growth (a non-GAAP
financial measure) is defined as revenue growth excluding the
impact of foreign exchange.
ZOETIS INC.
SEGMENT(a) EARNINGS
(UNAUDITED)
(millions of dollars)
Three Months Ended December
31,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
1,112
$
1,040
7
%
—
%
7
%
Cost of sales
216
213
1
%
—
%
1
%
Gross profit
896
827
8
%
—
%
8
%
Gross margin
80.6
%
79.5
%
Operating expenses
187
197
(5
) %
—
%
(5
) %
Other (income)/deductions-net
(12
)
2
*
*
*
U.S. Earnings
$
721
$
628
15
%
—
%
15
%
International:
Revenue
$
901
$
902
—
%
(12
) %
12
%
Cost of sales
274
273
—
%
(8
) %
8
%
Gross profit
627
629
—
%
(13
) %
13
%
Gross margin
69.6
%
69.7
%
Operating expenses
155
173
(10
) %
(10
) %
—
%
Other (income)/deductions-net
2
—
*
*
*
International Earnings
$
470
$
456
3
%
(14
) %
17
%
Total Reportable Segments
$
1,191
$
1,084
10
%
(6
) %
16
%
Other business activities(c)
(109
)
(105
)
4
%
Reconciling Items:
Corporate(d)
(302
)
(308
)
(2
) %
Purchase accounting
adjustments(e)
(40
)
(42
)
(5
) %
Acquisition-related costs(f)
(1
)
(4
)
(75
) %
Certain significant items(g)
(46
)
(29
)
59
%
Other unallocated(h)
(101
)
(90
)
12
%
Total Earnings(i)
$
592
$
506
17
%
(a) For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b) Operational growth (a non-GAAP
financial measure) is defined as growth excluding the impact of
foreign exchange.
(c) Other business activities reflect the
research and development costs managed by our Research and
Development organization as well as our contract manufacturing
business and human health business.
(d) Corporate includes, among other
things, certain costs associated with information technology,
administration expenses, interest expense, certain compensation
costs, certain procurement costs, and other costs not charged to
our operating segments.
(e) Purchase accounting adjustments
include certain charges related to the amortization of fair value
adjustments to inventory, intangible assets and property, plant and
equipment not charged to our operating segments.
(f) Acquisition-related costs include
costs associated with acquiring and integrating newly acquired
businesses, such as transaction costs and integration costs.
(g) Certain significant items includes
substantive, unusual items that, either as a result of their nature
or size, would not be expected to occur as part of our normal
business on a regular basis. Such items primarily include
restructuring charges and implementation costs associated with a
shift in our organizational structure and
cost-reduction/productivity initiatives that are not associated
with an acquisition, certain asset impairment charges, costs
associated with the operational efficiency initiative and supply
network strategy, and the impact of divestiture-related gains and
losses.
(h) Includes overhead expenses associated
with our manufacturing and supply operations not directly
attributable to an operating segment, as well as certain
procurement costs.
(i) Defined as income before provision for
taxes on income.
* Calculation not meaningful.
ZOETIS INC.
SEGMENT(a) EARNINGS
(UNAUDITED)
(millions of dollars)
Twelve Months Ended December
31,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
4,313
$
4,042
7
%
—
%
7
%
Cost of sales
803
788
2
%
—
%
2
%
Gross profit
3,510
3,254
8
%
—
%
8
%
Gross margin
81.4
%
80.5
%
Operating expenses
765
681
12
%
—
%
12
%
Other (income)/deductions-net
(18
)
4
*
*
*
U.S. Earnings
$
2,763
$
2,569
8
%
—
%
8
%
International:
Revenue
$
3,681
$
3,652
1
%
(8
) %
9
%
Cost of sales
1,083
1,106
(2
) %
(5
) %
3
%
Gross profit
2,598
2,546
2
%
(10
) %
12
%
Gross margin
70.6
%
69.7
%
Operating expenses
611
602
1
%
(8
) %
9
%
Other (income)/deductions-net
(3
)
(4
)
(25
) %
28
%
(53
) %
International Earnings
$
1,990
$
1,948
2
%
(10
) %
12
%
Total Reportable Segments
$
4,753
$
4,517
5
%
(5
) %
10
%
Other business activities(c)
(424
)
(406
)
4
%
Reconciling Items:
Corporate(d)
(1,073
)
(1,052
)
2
%
Purchase accounting adjustments(e)
(160
)
(175
)
(9
) %
Acquisition-related costs(f)
(5
)
(12
)
(58
) %
Certain significant items(g)
(56
)
(73
)
(23
) %
Other unallocated(h)
(379
)
(311
)
22
%
Total Earnings(i)
$
2,656
$
2,488
7
%
(a) For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b) Operational growth (a non-GAAP
financial measure) is defined as growth excluding the impact of
foreign exchange.
(c) Other business activities reflect the
research and development costs managed by our Research and
Development organization as well as our contract manufacturing
business and human health business.
(d) Corporate includes, among other things, certain costs
associated with information technology, administration expenses,
interest expense, certain
(e) Purchase accounting adjustments
include certain charges related to the amortization of fair value
adjustments to inventory, intangible assets and property, plant and
equipment not charged to our operating segments.
(f) Acquisition-related costs include
costs associated with acquiring and integrating newly acquired
businesses, such as transaction costs and integration costs.
(g) Certain significant items includes
substantive, unusual items that, either as a result of their nature
or size, would not be expected to occur as part of our normal
business on a regular basis. Such items primarily include certain
asset impairment charges, restructuring charges and implementation
costs associated with a shift in our organizational structure and
cost-reduction/productivity initiatives that are not associated
with an acquisition, costs associated with the operational
efficiency initiative and supply network strategy, and the impact
of divestiture-related gains and losses.
(h) Includes overhead expenses associated
with our manufacturing and supply operations not directly
attributable to an operating segment, as well as certain
procurement costs.
(i) Defined as income before provision for
taxes on income.
* Calculation not meaningful.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230213005363/en/
Media: Bill Price 1-973-443-2742
(o) william.price@zoetis.com Kristen
Seely 1-973-443-2777 (o) kristen.seely@zoetis.com
Investor: Steve Frank
1-973-822-7141 (o) steve.frank@zoetis.com Nick Soonthornchai
1-973-443-2792 (o) nick.soonthornchai@zoetis.com
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