Zoetis Announces First Quarter 2021 Results
Zoetis Inc. (NYSE: ZTS) today reported its financial results for the first quarter of 2021 and increased its guidance for full year 2021.
The company reported revenue of
Adjusted net income1 for the first quarter of 2021 was
On an operational2 basis, revenue for the first quarter of 2021 increased
EXECUTIVE COMMENTARY
“We are off to a very strong start in 2021 -- our best quarter ever -- with
“Looking ahead, we are raising guidance for operational growth in full-year revenue to the range of
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 first quarter of 2021:
-
Revenue in the U.S. segment was
$933 million , an increase of19% compared with the first quarter of 2020. Sales of companion animal products increased32% driven by growth in its parasiticides portfolio including the recently launched Simparica Trio® brand, the new triple combination parasiticide for dogs. Also contributing to growth was the company’s diagnostic franchise, resulting from increased sales of point-of-care consumables, and the key dermatology portfolio across both the Apoquel® and Cytopoint® brands. The company benefited from the continued recovery of veterinary clinic businesses, following the impact of social distancing restrictions that began in the same quarter of the prior year. Sales of livestock products decreased4% in the quarter. The poultry portfolio declined as a result of the expanded use of lower cost alternatives to the company’s premium products. Sales of swine products declined due to a non-recurring government purchase in the same quarter last year. These declines were partially offset by increased sales in the company’s cattle portfolio resulting from successful promotional activities.
-
Revenue in the International segment was
$922 million , an increase of27% on a reported basis and an increase of25% operationally compared with the first quarter of 2020. Sales of companion animal products grew40% on a reported basis and37% on an operational basis. Growth resulted from increased sales of the company’s parasiticides portfolio including the Simparica® and Revolution®/Stronghold® franchises, as well as the key dermatology portfolio across both the Apoquel and Cytopoint brands. Growth also resulted from the company’s broader in-line portfolio, which benefited from increased pet ownership and medicalization rates, as well as pent up demand resulting from COVID-19 restrictions. Sales of livestock products grew17% on both a reported and operational basis. Sales of swine products grew as a result of the continuing expansion of herd production and increased biosecurity measures in key accounts in the wake of African Swine Fever in China. Sales of cattle products grew due to promotional activities, key account penetration and favorable export market conditions in Brazil and other emerging markets around the world. Growth in the company’s fish portfolio was primarily the result of increased vaccine sales in key salmon markets, including favorable timing of vaccination programs. The recent acquisition of Fish Vet Group also contributed to growth in the quarter. Sales of poultry products grew modestly versus the same period in the prior year.
INVESTMENTS IN GROWTH
Zoetis continues to gain market approvals for its innovative monoclonal antibody (mAb) therapies that alleviate osteoarthritis (OA) pain in cats. Since its last quarterly earnings announcement, Zoetis received approval in the European Union (EU) for Solensia® (frunevetmab), the first injectable mAb for the alleviation of pain associated with OA in cats, a condition that is vastly underdiagnosed and undertreated in felines today; it is also approved in Switzerland.
In China, Zoetis’ second largest market in terms of revenue, the company received approvals for several of its leading products. On the livestock side, Fostera® PCV MH, a one-shot vaccine for pigs that offers long-lasting combined protection against porcine circovirus type 2 (PCV2) and Mycoplasma hyopneumoniae infections, was approved, along with Excenel® RTU EZ (ceftiofur hydrochloride), a key anti-infective for cattle and swine. For companion animals, Zoetis expanded the reach of its parasiticide offering for cats with the approval of Revolution® Plus (selamectin and sarolaner topical solution).
Additionally, Zoetis continues to bring leading products into new markets. In poultry, the company expanded its line of recombinant vector vaccines with the approval of Poulvac® Procerta™ HVT-ND in Canada, Brazil and other smaller markets. This vaccine provides early protection against the contemporary Marek and Newcastle viruses in chickens. In parasiticides, the company received approval of Simparica Trio (sarolaner, moxidectin, pyrantel chewable tablets) in Japan, Mexico and other smaller markets.
FINANCIAL GUIDANCE
Zoetis is increasing its full year 2021 guidance, which includes:
-
Revenue between
$7.50 0 billion and$7.62 5 billion -
Reported diluted EPS between
$4.08 and$4.19 -
Adjusted diluted EPS between
$4.42 and$4.51
This guidance reflects foreign exchange rates as of late April. 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 first quarter 2021 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 May 6, 2021.
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 nearly 70 years innovating ways to predict, prevent, detect, and treat animal illness, Zoetis continues to stand by those raising and caring for animals worldwide -- from livestock farmers to veterinarians and pet owners. The company’s leading portfolio and pipeline of medicines, vaccines, diagnostics and technologies make a difference in over 100 countries. In 2020, Zoetis generated revenue of
1 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.
2 Operational revenue growth (a non-GAAP financial measure) is defined as growth excluding the impact of foreign exchange.
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; expectations regarding products, product approvals or products under development, expected timing of product launches; the impact of the coronavirus (COVID-19) pandemic and any recovery therefrom on our business, suppliers, 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 and dividend payments; 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2020, 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. Such risks and uncertainties may be amplified by the COVID-19 pandemic and its potential impact on the global economy and our business. 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. Reconciliation of non-GAAP financial measures and 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.
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ZOETIS INC. |
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME(a) |
||||||||||
(UNAUDITED) |
||||||||||
(millions of dollars, except per share data) |
||||||||||
|
|
First Quarter |
|
|
||||||
|
2021 |
|
2020 |
|
% Change |
|||||
Revenue |
|
$ |
1,871 |
|
|
$ |
1,534 |
|
|
22 |
Costs and expenses: |
|
|
|
|
|
|
||||
Cost of sales |
|
549 |
|
|
459 |
|
|
20 |
||
Selling, general and administrative expenses |
|
409 |
|
|
389 |
|
|
5 |
||
Research and development expenses |
|
118 |
|
|
107 |
|
|
10 |
||
Amortization of intangible assets |
|
40 |
|
|
40 |
|
|
— |
||
Restructuring charges and certain acquisition-related costs |
|
9 |
|
|
9 |
|
|
— |
||
Interest expense |
|
57 |
|
|
53 |
|
|
8 |
||
Other (income)/deductions–net |
|
2 |
|
|
(20 |
) |
|
* |
||
Income before provision for taxes on income |
|
687 |
|
|
497 |
|
|
38 |
||
Provision for taxes on income |
|
129 |
|
|
74 |
|
|
74 |
||
Net income before allocation to noncontrolling interests |
|
558 |
|
|
423 |
|
|
32 |
||
Less: Net loss attributable to noncontrolling interests |
|
(1 |
) |
|
— |
|
|
* |
||
Net income attributable to Zoetis |
|
$ |
559 |
|
|
$ |
423 |
|
|
32 |
|
|
|
|
|
|
|
||||
Earnings per share—basic |
|
$ |
1.18 |
|
|
$ |
0.89 |
|
|
33 |
|
|
|
|
|
|
|
||||
Earnings per share—diluted |
|
$ |
1.17 |
|
|
$ |
0.88 |
|
|
33 |
|
|
|
|
|
|
|
||||
Weighted-average shares used to calculate earnings per share |
|
|
|
|
|
|
||||
Basic |
|
475.5 |
|
|
475.6 |
|
|
|
||
Diluted |
|
477.9 |
|
|
479.0 |
|
|
|
||
|
|
|
|
|
|
|
||||
(a) |
The condensed consolidated statements of income present the first quarter ended March 31, 2021 and March 31, 2020. Subsidiaries operating outside the United States are included for the first quarter ended February 28, 2021 and February 29, 2020. |
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ZOETIS INC. |
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RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION |
||||||||||||||||||||
CERTAIN LINE ITEMS |
||||||||||||||||||||
(UNAUDITED) |
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(millions of dollars, except per share data) |
||||||||||||||||||||
|
|
Quarter Ended March 31, 2021 |
||||||||||||||||||
|
|
GAAP
|
|
Purchase
|
|
Acquisition-
|
|
Certain
|
|
Non-GAAP
|
||||||||||
Cost of sales |
|
$ |
549 |
|
|
$ |
(2 |
) |
|
$ |
— |
|
|
$ |
(4 |
) |
|
$ |
543 |
|
Gross profit |
|
1,322 |
|
|
2 |
|
|
— |
|
|
4 |
|
|
1,328 |
|
|||||
Selling, general and administrative expenses |
|
409 |
|
|
(8 |
) |
|
— |
|
|
— |
|
|
401 |
|
|||||
Amortization of intangible assets |
|
40 |
|
|
(34 |
) |
|
— |
|
|
— |
|
|
6 |
|
|||||
Restructuring charges and certain acquisition-related costs |
|
9 |
|
|
— |
|
|
(5 |
) |
|
(4 |
) |
|
— |
|
|||||
Income before provision for taxes on income |
|
687 |
|
|
44 |
|
|
5 |
|
|
8 |
|
|
744 |
|
|||||
Provision for taxes on income |
|
129 |
|
|
10 |
|
|
1 |
|
|
2 |
|
|
142 |
|
|||||
Net income attributable to Zoetis |
|
559 |
|
|
34 |
|
|
4 |
|
|
6 |
|
|
603 |
|
|||||
Earnings per common share attributable to Zoetis–diluted |
|
1.17 |
|
|
0.07 |
|
|
0.01 |
|
|
0.01 |
|
|
1.26 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Quarter Ended March 31, 2020 |
||||||||||||||||||
|
|
GAAP
|
|
Purchase
|
|
Acquisition-
|
|
Certain
|
|
Non-GAAP
|
||||||||||
Cost of sales |
|
$ |
459 |
|
|
$ |
(2 |
) |
|
$ |
— |
|
|
$ |
(2 |
) |
|
$ |
455 |
|
Gross profit |
|
1,075 |
|
|
2 |
|
|
— |
|
|
2 |
|
|
1,079 |
|
|||||
Selling, general and administrative expenses |
|
389 |
|
|
(18 |
) |
|
— |
|
|
(2 |
) |
|
369 |
|
|||||
Amortization of intangible assets |
|
40 |
|
|
(34 |
) |
|
— |
|
|
— |
|
|
6 |
|
|||||
Restructuring charges and certain acquisition-related costs |
|
9 |
|
|
— |
|
|
(7 |
) |
|
(2 |
) |
|
— |
|
|||||
Other (income)/deductions–net |
|
(20 |
) |
|
— |
|
|
— |
|
|
17 |
|
|
(3 |
) |
|||||
Income before provision for taxes on income |
|
497 |
|
|
54 |
|
|
7 |
|
|
(11 |
) |
|
547 |
|
|||||
Provision for taxes on income |
|
74 |
|
|
22 |
|
|
(1 |
) |
|
(3 |
) |
|
92 |
|
|||||
Net income attributable to Zoetis |
|
423 |
|
|
32 |
|
|
8 |
|
|
(8 |
) |
|
455 |
|
|||||
Earnings per common share attributable to Zoetis–diluted |
|
0.88 |
|
|
0.07 |
|
|
0.02 |
|
|
(0.02 |
) |
|
0.95 |
|
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(a) |
The condensed consolidated statements of income present the first quarter ended March 31, 2021 and March 31, 2020. Subsidiaries operating outside the United States are included for the first quarter ended February 28, 2021 and February 29, 2020. |
(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). |
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ZOETIS INC. |
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NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION |
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CERTAIN LINE ITEMS |
||||||||
(UNAUDITED) |
||||||||
(millions of dollars) |
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(1) Acquisition-related costs include the following: |
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|
|
First Quarter |
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|
|
2021 |
|
2020 |
||||
Integration costs(a)
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