- Reports Revenue of $2.2 Billion, Growing 6%, and Net Income
of $671 Million, or $1.45 per Diluted Share, Increasing 27% and
29%, Respectively, on a Reported Basis for Second Quarter
2023
- Delivers 9% Operational Growth in Revenue and a 12%
Operational Growth in Adjusted Net Income for Second Quarter
2023
- Reports Adjusted Net Income of $652 Million, or Adjusted
Diluted EPS of $1.41, for Second Quarter 2023
- Updates Full Year 2023 Revenue Guidance of $8.500 - $8.650
Billion Due to the Impact of Foreign Exchange Rates
- Maintains Full Year 2023 Guidance for Operational Revenue
Growth of 6% to 8% and Adjusted Net Income of 7% to 9%
Zoetis Inc. (NYSE:ZTS) today reported its financial results for
the second quarter of 2023 and updated its guidance for full year
2023.
The company reported revenue of $2.2 billion for the second
quarter of 2023, an increase of 6% compared with the second quarter
of 2022. On an operational1 basis, revenue for the second quarter
of 2023 increased 9% compared with the second quarter of 2022,
excluding the impact of foreign currency. Net income for the second
quarter of 2023 was $671 million, or $1.45 per diluted share, an
increase of 27% and 29%, respectively, on a reported basis.
Adjusted net income2 for the second quarter of 2023 was $652
million, or $1.41 per diluted share, an increase of 15% and 18%,
respectively, on a reported basis. Adjusted net income for the
second quarter of 2023 excludes the net favorable impact of $19
million for purchase accounting adjustments, acquisition-related
costs and certain significant items.
EXECUTIVE COMMENTARY
“Today, we reported strong second quarter results of 9%
operational growth in revenue and 12% operational growth in
adjusted net income, based on our diverse portfolio across markets
and species," said Kristin Peck, Chief Executive Officer of Zoetis.
“As expected, we returned to more balanced segment growth, with 11%
operational revenue growth internationally and 7% revenue growth in
the U.S. Our companion animal portfolio grew 11% operationally,
driven by our major franchises in dermatology, osteoarthritis pain
and pet parasiticides. Our livestock portfolio grew 4%
operationally, driven by sales of poultry, cattle and fish
products.”
“With the first half of the year playing out largely as
expected, we are maintaining our full year guidance for operational
growth of 6% to 8% in revenue and 7% to 9% in adjusted net income.
We expect continued strong growth in the second half, led by our
companion animal portfolio. Looking ahead, we remain confident in
the sustainable, underlying demand for animal health, based on the
strength of the human-animal bond, people’s willingness to spend on
pet health, and the essential need for a safe and secure food
supply. I remain very positive about achieving our full year
guidance thanks to our purpose-driven colleagues, innovation-driven
culture and diverse portfolio that continue to drive our
success.”
QUARTERLY HIGHLIGHTS
Zoetis organizes and manages its commercial operations across
two segments: 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 second quarter of 2023:
- Revenue in the U.S. segment was $1.165 billion, an
increase of 7% compared with the second quarter of 2022. Sales of
companion animal products increased 7%, driven by the company’s key
dermatology portfolio including Apoquel® and Cytopoint®. Also
contributing to growth in the quarter were the company’s vaccine
portfolio and Solensia®, a monoclonal antibody product for
osteoarthritis pain in cats. Sales of livestock products increased
5% in the quarter. Sales of cattle products increased primarily due
to increased sales of Draxxin®, resulting from a favorable
comparable quarter versus the prior year, and sales of the implant
product Synovex®. Growth in the company’s poultry portfolio was due
to increased sales of vaccines and medicated feed additives (MFAs).
Sales of swine products declined modestly in the quarter, primarily
due to decreased disease prevalence.
- Revenue in the International segment was $995 million,
an increase of 6% on a reported basis and 11% operationally
compared with the second quarter of 2022. Sales of companion animal
products grew 13% on a reported basis and 17% operationally. Growth
in the quarter was driven by the company’s parasiticide portfolio,
including Revolution®/Stronghold® and Simparica Trio®, its
monoclonal antibody products for osteoarthritis pain — Librela® for
dogs and Solensia® for cats, as well as its key dermatology
products Apoquel and Cytopoint. Sales of livestock products
declined 1% on a reported basis and grew 4% operationally. Growth
in the company’s poultry portfolio was driven by key account
penetration and rotation of medicated feed additives in core
poultry markets, including Latin America, Europe and the Middle
East. Growth in the company’s fish portfolio was the result of
increased sales of vaccines across key salmon markets, primarily
Norway and Chile. Sales of cattle products grew primarily due to
pricing in hyperinflationary markets and supply recovery, partially
offset by unfavorable market conditions in some key and emerging
markets. Sales of swine products declined as a result of supply
constraints in Western Europe.
INVESTMENTS IN GROWTH AND
SUSTAINABILITY
Zoetis continues to advance pain management and dermatology
innovation for dogs. Since its last quarterly earnings
announcement, the company received U.S. approval for Librela
(bedinvetmab), the first and only injectable monoclonal antibody
(mAb) treatment for the control of canine osteoarthritis (OA) pain.
Librela is also approved in the European Union (EU), Canada,
Brazil, Chile, Japan, Australia and other international markets.
Additionally, Zoetis received U.S. approval for Apoquel
Chewable (oclacitinib chewable tablet) for the control of
pruritus associated with allergic dermatitis and control of atopic
dermatitis in dogs. Previously approved in the EU, Mexico,
Australia, Canada, Japan and other international markets, Apoquel
Chewable is the first and only chewable treatment for the control
of allergic itch and inflammation in dogs in the U.S.
In Diagnostics, the company enhanced its Vetscan® product line
with the announcement of Vetscan Mastigram+, which will be
launching in markets around the world in the second half of 2023.
This rapid, on-farm mastitis diagnostic enables farmers and
veterinarians to deliver more targeted therapies for dairy cows,
enabling more judicious use of antimicrobials.
In June, Zoetis published its 2022 Sustainability Report,
describing the company’s progress toward achieving its Driven to
Care long-term sustainability aspirations and continued disclosure
on environmental, social and governance (ESG) topics. The report
highlights achievements toward the company’s journey to advance
sustainability in animal health through specific actions that
support Communities, Animals and the Planet.
FINANCIAL GUIDANCE
Zoetis is updating its full year reported 2023 guidance due to
foreign exchange rates and a one-time gain from a business
development deal.
- Updates revenue to between $8.500 billion to $8.650 billion
(maintains operational growth of 6% to 8%)
- Updates reported net income to between $2.400 billion to $2.460
billion
- Updates adjusted net income to between $2.500 billion to $2.550
billion (maintains operational growth of 7% to 9%)
- Updates reported diluted EPS of $5.15 to $5.27 due to the
impact of foreign exchange rates and a one-time gain from a
business development deal
- Updates adjusted diluted EPS between $5.37 to $5.47 due to the
impact of foreign exchange rates
This guidance reflects foreign exchange rates as of late July.
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 second quarter
2023 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 August 8, 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; R&D costs; timing and likelihood of success;
expectations regarding products, product approvals or products
under development and expected timing of product launches; the
impact of the coronavirus (COVID-19) global pandemic and any
recovery therefrom on our business, supply chain, customers and
employees; 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 rates 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 on the 'Investor Relations'
section of our website at www.zoetis.com, as well as on LinkedIn,
Facebook, X (formerly Twitter) and YouTube. We encourage investors
and potential investors to consult our website regularly and to
follow us on social media for company news and information.
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
Six Months Ended
June 30,
June 30,
2023
2022
% Change
2023
2022
% Change
Revenue
$
2,180
$
2,052
6
$
4,180
$
4,038
4
Costs and expenses:
Cost of sales
607
625
(3
)
1,195
1,194
—
Selling, general and administrative
expenses
556
529
5
1,061
994
7
Research and development expenses
146
135
8
288
257
12
Amortization of intangible assets
37
37
—
74
78
(5
)
Restructuring charges and certain
acquisition-related costs
8
1
*
29
3
*
Interest expense, net of capitalized
interest
58
53
9
121
106
14
Other (income)/deductions–net
(104
)
2
*
(157
)
9
*
Income before provision for taxes on
income
872
670
30
1,569
1,397
12
Provision for taxes on income
202
141
43
348
274
27
Net income before allocation to
noncontrolling interests
670
529
27
1,221
1,123
9
Less: Net loss attributable to
noncontrolling interests
(1
)
—
*
(2
)
(1
)
*
Net income attributable to Zoetis Inc.
$
671
$
529
27
$
1,223
$
1,124
9
Earnings per share—basic
$
1.45
$
1.13
28
$
2.64
$
2.39
10
Earnings per share—diluted
$
1.45
$
1.12
29
$
2.64
$
2.38
11
Weighted-average shares used to calculate
earnings per share
Basic
461.9
470.0
462.7
471.1
Diluted
462.9
471.5
463.8
472.8
(a) The condensed consolidated statements
of income present the three and six months ended June 30, 2023 and
2022. Subsidiaries operating outside the United States are included
for the three and six months ended May 31, 2023 and 2022.
* Calculation not meaningful.
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 June 30,
2023
GAAP
Reported(a)
Purchase
Accounting
Adjustments
Acquisition-
Related
Costs(1)
Certain
Significant
Items(2)
Non-GAAP
Adjusted(b)
Cost of sales
$
607
$
(5
)
$
—
$
—
$
602
Gross profit
1,573
5
—
—
1,578
Selling, general and administrative
expenses
556
(7
)
—
—
549
Amortization of intangible assets
37
(31
)
—
—
6
Restructuring charges and certain
acquisition-related costs
8
—
(4
)
(4
)
—
Other (income)/deductions–net
(104
)
—
—
94
(10
)
Income before provision for taxes on
income
872
43
4
(90
)
829
Provision for taxes on income
202
9
1
(34
)
178
Net income attributable to Zoetis
671
34
3
(56
)
652
Earnings per common share attributable to
Zoetis–diluted
1.45
0.07
0.01
(0.12
)
1.41
Three months ended June 30,
2022
GAAP
Reported(a)
Purchase
Accounting
Adjustments
Acquisition-
Related
Costs(1)
Certain
Significant
Items(2)
Non-GAAP
Adjusted(b)
Cost of sales
$
625
$
(1
)
$
—
$
(4
)
$
620
Gross profit
1,427
1
—
4
1,432
Selling, general and administrative
expenses
529
(7
)
—
—
522
Amortization of intangible assets
37
(32
)
—
—
5
Restructuring charges and certain
acquisition-related costs
1
—
(1
)
—
—
Income before provision for taxes on
income
670
40
1
4
715
Provision for taxes on income
141
9
—
(2
)
148
Net income attributable to Zoetis
529
31
1
6
567
Earnings per common share attributable to
Zoetis–diluted
1.12
0.07
—
0.01
1.20
(a) The condensed consolidated statements
of income present the three months ended June 30, 2023 and 2022.
Subsidiaries operating outside the United States are included for
the three months ended May 31, 2023 and 2022.
(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)
Six Months Ended June 30,
2023
GAAP
Reported(a)
Purchase
Accounting
Adjustments
Acquisition-
Related
Costs(1)
Certain
Significant
Items(2)
Non-GAAP
Adjusted(b)
Cost of sales
$
1,195
$
(9
)
$
—
$
—
$
1,186
Gross profit
2,985
9
—
—
2,994
Selling, general and administrative
expenses
1,061
(14
)
—
—
1,047
Amortization of intangible assets
74
(62
)
—
—
12
Restructuring charges and certain
acquisition-related costs
29
—
(5
)
(24
)
—
Other (income)/deductions–net
(157
)
—
—
92
(65
)
Income before provision for taxes on
income
1,569
85
5
(68
)
1,591
Provision for taxes on income
348
17
1
(32
)
334
Net income attributable to Zoetis
1,223
68
4
(36
)
1,259
Earnings per common share attributable to
Zoetis–diluted
2.64
0.14
0.01
(0.08
)
2.71
Six Months Ended June 30,
2022
GAAP
Reported(a)
Purchase
Accounting
Adjustments
Acquisition-
Related
Costs(1)
Certain
Significant
Items(2)
Non-GAAP
Adjusted(b)
Cost of sales
$
1,194
$
(2
)
$
—
$
(7
)
$
1,185
Gross profit
2,844
2
—
7
2,853
Selling, general and administrative
expenses
994
(14
)
—
—
980
Amortization of intangible assets
78
(64
)
—
—
14
Restructuring charges and certain
acquisition-related costs
3
—
(3
)
—
—
Other (income)/deductions–net
9
—
—
3
12
Income before provision for taxes on
income
1,397
80
3
4
1,484
Provision for taxes on income
274
19
1
(1
)
293
Net income attributable to Zoetis
1,124
61
2
5
1,192
Earnings per common share attributable to
Zoetis–diluted
2.38
0.13
—
0.01
2.52
(a) The condensed consolidated statements
of income present the six months ended June 30, 2023 and 2022.
Subsidiaries operating outside the United States are included for
the six months ended May 31, 2023 and 2022.
(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
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Integration costs(a)
$
1
$
1
$
2
$
3
Transaction costs(b)
2
—
2
—
Restructuring charges(c)
1
—
1
—
Total acquisition-related
costs—pre-tax
4
1
5
3
Income taxes(d)
1
—
1
1
Total acquisition-related costs—net of
tax
$
3
$
1
$
4
$
2
(a) 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.
(b) Transaction costs represent 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.
(c) Represents 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
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Other restructuring charges and
cost-reduction/productivity initiatives(a)
$
4
$
1
$
24
$
3
Certain asset impairment charges(b)
10
4
10
4
Net gain on sale of business(c)
(101
)
—
(101
)
—
Other
(3
)
(1
)
(1
)
(3
)
Total certain significant
items—pre-tax
(90
)
4
(68
)
4
Income taxes(d)
(34
)
(2
)
(32
)
(1
)
Total certain significant items—net of
tax
$
(56
)
$
6
$
(36
)
$
5
(a) For the three and six months ended June 30, 2023,
primarily consisted of employee termination costs related to
organizational structure refinements, included in Restructuring
charges and certain acquisition-related costs. For the three and
six months ended June 30, 2022, primarily consisted of product
transfer costs, included in Cost of sales. (b) For the three
and six months ended June 30, 2023, represents certain asset
impairment charges related to our precision animal health business,
included in Other (income)/deductions–net. For the three and six
months ended June 30, 2022, primarily represents inventory changes
related to the consolidation of manufacturing sites in China,
included in Cost of sales. (c) Represents a net gain on the
sale of a majority interest in our pet insurance business, 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. Income taxes in Certain
significant items also includes:
- For the three and six months ended June 30, 2023, tax expense
related to changes to prior years' tax positions with regard to the
one-time mandatory deemed repatriation tax under the Tax Cuts and
Jobs Act.
- For the three and six months ended June 30, 2022, changes in
valuation allowances.
ZOETIS INC.
ADJUSTED SELECTED COSTS, EXPENSES
AND INCOME(a)
(UNAUDITED)
(millions of dollars)
Three Months Ended
June 30,
% Change
2023
2022
Total
Foreign
Exchange
Operational(b)
Adjusted cost of sales
$
602
$
620
(3
)%
(9
)%
6
%
as a percent of revenue
27.6
%
30.2
%
NA
NA
NA
Adjusted SG&A expenses
549
522
5
%
(3
)%
8
%
Adjusted R&D expenses
146
135
8
%
—
%
8
%
Adjusted net income attributable to
Zoetis
652
567
15
%
3
%
12
%
Six Months Ended
June 30,
% Change
2023
2022
Total
Foreign
Exchange
Operational(b)
Adjusted cost of sales
$
1,186
$
1,185
—
%
(9
)%
9
%
as a percent of revenue
28.4
%
29.3
%
NA
NA
NA
Adjusted SG&A expenses
1,047
980
7
%
(2
)%
9
%
Adjusted R&D expenses
288
257
12
%
(1
)%
13
%
Adjusted net income attributable to
Zoetis
1,259
1,192
6
%
2
%
4
%
(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
$8,500 to $8,650
Operational growth(a)
6% to 8%
Adjusted cost of sales as a percentage of
revenue(b)
Approximately 29%
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 $160
Effective tax rate on adjusted
income(b)
20.0% to 21.0%
Adjusted diluted EPS(b)
$5.37 to $5.47
Adjusted net income(b)
$2,500 to $2,550
Operational growth(a)(c)
7% to 9%
Certain significant items and
acquisition-related costs(d)
$(20) - $(30)
The guidance reflects foreign exchange
rates as of late July 2023.
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(c)
Cost of sales as a percentage of
revenue
~ 29.2%
~ (0.2%)
~ 29.0%
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-net
~ $65
~ $95
~ $160
Effective tax rate
19.0% to 20.0%
~ (1.0)%
20.0% to 21.0%
Diluted EPS
$5.15 to $5.27
$(0.04) - $(0.06)
~ $0.26
$5.37 to $5.47
Net income attributable to Zoetis
$2,400 to $2,460
$(20) - $(30)
~ $120
$2,500 to $2,550
(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
June 30,
% Change
2023
2022
Total
Foreign
Exchange
Operational(b)
Revenue:
Companion Animal
$
1,489
$
1,366
9
%
(2
)%
11
%
Livestock
671
668
—
%
(4
)%
4
%
Contract Manufacturing & Human
Health
20
18
11
%
(1
)%
12
%
Total Revenue
$
2,180
$
2,052
6
%
(3
)%
9
%
U.S.
Companion Animal
$
959
$
895
7
%
—
%
7
%
Livestock
206
196
5
%
—
%
5
%
Total U.S. Revenue
$
1,165
$
1,091
7
%
—
%
7
%
International
Companion Animal
$
530
$
471
13
%
(4
)%
17
%
Livestock
465
472
(1
)%
(5
)%
4
%
Total International Revenue
$
995
$
943
6
%
(5
)%
11
%
Companion Animal:
Dogs and Cats
$
1,424
$
1,303
9
%
(2
)%
11
%
Horses
65
63
3
%
(2
)%
5
%
Total Companion Animal Revenue
$
1,489
$
1,366
9
%
(2
)%
11
%
Livestock:
Cattle
$
329
$
328
—
%
(4
)%
4
%
Swine
133
144
(8
)%
(4
)%
(4
)%
Poultry
131
121
8
%
(4
)%
12
%
Fish
52
47
11
%
(5
)%
16
%
Sheep and other
26
28
(7
)%
(9
)%
2
%
Total Livestock Revenue
$
671
$
668
—
%
(4
)%
4
%
(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)
Six Months Ended
June 30,
% Change
2023
2022
Total
Foreign Exchange
Operational(b)
Revenue:
Companion Animal
$
2,714
$
2,629
3
%
(2
)%
5
%
Livestock
1,429
1,373
4
%
(4
)%
8
%
Contract Manufacturing & Human
Health
37
36
3
%
(1
)%
4
%
Total Revenue
$
4,180
$
4,038
4
%
(2
)%
6
%
U.S.
Companion Animal
$
1,680
$
1,669
1
%
—
%
1
%
Livestock
490
442
11
%
—
%
11
%
Total U.S. Revenue
$
2,170
$
2,111
3
%
—
%
3
%
International
Companion Animal
$
1,034
$
960
8
%
(5
)%
13
%
Livestock
939
931
1
%
(6
)%
7
%
Total International Revenue
$
1,973
$
1,891
4
%
(6
)%
10
%
Companion Animal:
Dogs and Cats
$
2,577
$
2,502
3
%
(2
)%
5
%
Horses
137
127
8
%
(3
)%
11
%
Total Companion Animal Revenue
$
2,714
$
2,629
3
%
(2
)%
5
%
Livestock:
Cattle
$
728
$
692
5
%
(4
)%
9
%
Swine
275
298
(8
)%
(4
)%
(4
)%
Poultry
270
245
10
%
(4
)%
14
%
Fish
101
91
11
%
(6
)%
17
%
Sheep and other
55
47
17
%
(9
)%
26
%
Total Livestock Revenue
$
1,429
$
1,373
4
%
(4
)%
8
%
(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
June 30,
% Change
2023
2022
Total
Foreign
Exchange
Operational(a)
Total International
$
995.4
$
943.2
6
%
(5
)%
11
%
Australia
81.7
80.1
2
%
(9
)%
11
%
Brazil
91.5
85.9
7
%
(3
)%
10
%
Canada
69.5
66.8
4
%
(7
)%
11
%
Chile
39.1
34.2
14
%
1
%
13
%
China
84.1
96.2
(13
)%
(6
)%
(7
)%
France
33.9
31.3
8
%
—
%
8
%
Germany
52.5
45.9
14
%
—
%
14
%
Italy
35.6
31.6
13
%
1
%
12
%
Japan
46.7
40.9
14
%
(9
)%
23
%
Mexico
38.3
33.2
15
%
12
%
3
%
Spain
30.9
34.5
(10
)%
1
%
(11
)%
United Kingdom
63.3
51.0
24
%
(5
)%
29
%
Other developed markets
124.9
118.1
6
%
(4
)%
10
%
Other emerging markets
203.4
193.5
5
%
(11
)%
16
%
Six Months Ended
June 30,
% Change
2023
2022
Total
Foreign
Exchange
Operational(a)
Total International
$
1,972.9
$
1,890.7
4
%
(6
)%
10
%
Australia
163.5
145.0
13
%
(7
)%
20
%
Brazil
175.5
162.7
8
%
1
%
7
%
Canada
119.6
115.8
3
%
(7
)%
10
%
Chile
78.3
75.4
4
%
1
%
3
%
China
186.3
198.9
(6
)%
(7
)%
1
%
France
67.6
63.2
7
%
(3
)%
10
%
Germany
97.8
89.0
10
%
(3
)%
13
%
Italy
61.1
62.0
(1
)%
(2
)%
1
%
Japan
85.8
100.0
(14
)%
(10
)%
(4
)%
Mexico
76.9
68.0
13
%
10
%
3
%
Spain
63.8
67.9
(6
)%
(3
)%
(3
)%
United Kingdom
131.5
114.5
15
%
(9
)%
24
%
Other developed markets
246.8
233.3
6
%
(5
)%
11
%
Other emerging markets
418.4
395.0
6
%
(12
)%
18
%
(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
June 30,
% Change
2023
2022
Total
Foreign
Exchange
Operational(b)
U.S.:
Revenue
$
1,165
$
1,091
7
%
—
%
7
%
Cost of Sales
214
198
8
%
—
%
8
%
Gross Profit
951
893
6
%
—
%
6
%
Gross Margin
81.6
%
81.9
%
Operating Expenses
212
207
2
%
—
%
2
%
Other (income)/deductions-net
—
(7
)
*
*
*
U.S. Earnings
$
739
$
693
7
%
—
%
7
%
International:
Revenue
$
995
$
943
6
%
(5
)%
11
%
Cost of Sales
315
288
9
%
(11
)%
20
%
Gross Profit
680
655
4
%
(2
)%
6
%
Gross Margin
68.3
%
69.5
%
Operating Expenses
166
161
3
%
(8
)%
11
%
Other (income)/deductions-net
(1
)
(2
)
(50
)%
49
%
(99
)%
International Earnings
$
515
$
496
4
%
(1
)%
5
%
Total Reportable Segments
$
1,254
$
1,189
5
%
(1
)%
6
%
Other business activities(c)
(116
)
(111
)
5
%
Reconciling Items:
Corporate(d)
(256
)
(267
)
(4
)%
Purchase accounting adjustments(e)
(43
)
(40
)
8
%
Acquisition-related costs(f)
(4
)
(1
)
*
Certain significant items(g)
90
(4
)
*
Other unallocated(h)
(53
)
(96
)
(45
)%
Total Earnings(i)
$
872
$
670
30
%
(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 includes 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 income and expense, certain
compensation 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 certain
asset impairment charges, restructuring charges and implementation
costs associated with cost-reduction/productivity initiatives that
are not associated with an acquisition and the impact of
divestiture-related gains and losses.
(h) Includes overhead expenses associated
with our global 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)
Six Months Ended
June 30,
% Change
2023
2022
Total
Foreign
Exchange
Operational(b)
U.S.:
Revenue
$
2,170
$
2,111
3
%
—
%
3
%
Cost of Sales
417
383
9
%
—
%
9
%
Gross Profit
1,753
1,728
1
%
—
%
1
%
Gross Margin
80.8
%
81.9
%
Operating Expenses
400
372
8
%
—
%
8
%
Other (income)/deductions-net
—
(7
)
*
*
*
U.S. Earnings
$
1,353
$
1,363
(1
)%
—
%
(1
)%
International:
Revenue
$
1,973
$
1,891
4
%
(6
)%
10
%
Cost of Sales
606
553
10
%
(10
)%
20
%
Gross Profit
1,367
1,338
2
%
(4
)%
6
%
Gross Margin
69.3
%
70.8
%
Operating Expenses
317
306
4
%
(7
)%
11
%
Other (income)/deductions-net
—
(2
)
*
*
*
International Earnings
$
1,050
$
1,034
2
%
(3
)%
5
%
Total Reportable Segments
$
2,403
$
2,397
—
%
(2
)%
2
%
Other business activities(c)
(230
)
(209
)
10
%
Reconciling Items:
Corporate(d)
(464
)
(526
)
(12
)%
Purchase accounting adjustments(e)
(85
)
(80
)
6
%
Acquisition-related costs(f)
(5
)
(3
)
67
%
Certain significant items(g)
68
(4
)
*
Other unallocated(h)
(118
)
(178
)
(34
)%
Total Earnings(i)
$
1,569
$
1,397
12
%
(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 includes 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 income and expense, certain
compensation 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 certain
asset impairment charges, restructuring charges and implementation
costs associated with cost-reduction/productivity initiatives that
are not associated with an acquisition and the impact of
divestiture-related gains and losses.
(h) Includes overhead expenses associated
with our global 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/20230807546206/en/
Media Contacts: Bill Price 1-973-443-2742 (o)
william.price@zoetis.com
Kristen Seely 1-973-443-2777 (o) kristen.seely@zoetis.com
Investor Contacts: 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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