10-QPeriod: Q3 FY2020

Zoetis Inc. Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 5, 2020For Securities:ZTS

Summary

Zoetis Inc. reported strong financial results for the third quarter and the first nine months of 2020, demonstrating resilience and continued growth. Revenue increased by 13% to $1.79 billion for the third quarter and by 6% to $4.87 billion for the nine-month period, driven by robust operational growth across both domestic and international segments. This growth was fueled by strong performance in companion animal products, particularly in parasiticides and dermatology, and a recovery in livestock products. Net income attributable to Zoetis Inc. rose by 11% to $479 million for the quarter and by 15% to $1.28 billion for the nine-month period, reflecting effective cost management and increased sales. The company maintained a healthy balance sheet with a significant increase in cash and cash equivalents, reinforcing its financial stability amidst the ongoing COVID-19 pandemic. The company's diversified product portfolio, strategic acquisitions, and focus on innovation continue to drive its performance. Despite the challenges presented by the global pandemic, Zoetis has successfully navigated the environment, with its designation as an essential business allowing for continued operations. Management's outlook remains positive, with continued investment in key growth areas and product lines, positioning the company for sustained future success.

Financial Highlights

53 data points
Beta

Revenue

$1.79B

69.4% Gross Margin

Net Income

$479.00M

26.8% Net Margin

EPS (Diluted)

$1.00

Total Assets

$13.72B

Cash & Equivalents

$3.65B

Free Cash Flow

$445.00M

Financial Statements
Beta
Revenue$1.79B
Cost of Revenue$546.00M
Gross Profit$1.24B
SG&A Expenses$424.00M
Interest Expense$62.00M
Net Income$479.00M
EPS (Basic)$1.01
EPS (Diluted)$1.00
Shares Outstanding (Basic)475.50M
Shares Outstanding (Diluted)478.50M

Key Highlights

  • 1Total revenue for the third quarter of 2020 increased by 13% to $1.79 billion compared to the prior year period, with operational revenue growth of 15%.
  • 2Revenue for the first nine months of 2020 increased by 6% to $4.87 billion, with operational revenue growth of 9%.
  • 3Net income attributable to Zoetis Inc. for the third quarter of 2020 increased by 11% to $479 million, and for the first nine months of 2020 increased by 15% to $1.28 billion.
  • 4Companion animal products showed strong growth, driven by key dermatology products and parasiticides like the Simparica franchise.
  • 5Livestock products demonstrated a recovery, particularly in cattle, as market conditions improved and buying patterns normalized post-COVID-19 impacts.
  • 6Cash and cash equivalents significantly increased to $3.65 billion as of September 30, 2020, up from $1.93 billion at the end of 2019, indicating strong cash generation.
  • 7The company was in compliance with all financial covenants related to its credit facility, demonstrating sound financial management.

Frequently Asked Questions

Zoetis' revenue increased by 13% to $1.79 billion for the three months ended September 30, 2020, compared to $1.58 billion for the three months ended September 30, 2019. On an operational basis, excluding foreign exchange impacts, revenue grew by 15%.

Operational revenue growth for the first nine months of 2020 was primarily driven by volume growth from in-line products (including key dermatology products) and new products (approximately 3% each), along with price growth (approximately 2%) and contributions from recent acquisitions (approximately 1%). Foreign exchange negatively impacted reported revenue growth by approximately 3%.

The company noted that the COVID-19 pandemic has had a significant impact on its results, with decreased demand anticipated for the remainder of 2020 due to impacts on customers, particularly livestock customers facing facility closures and reduced packing plant capacity, and companion animal customers experiencing reduced demand for veterinary services. However, Zoetis was designated an essential business, allowing for continued operations. Despite these challenges, the company reported strong revenue and net income growth.

Zoetis' cash and cash equivalents significantly increased to $3.65 billion as of September 30, 2020, up from $1.93 billion at December 31, 2019. The company maintained a strong liquidity position, with working capital of $4.36 billion and a current ratio of 2.82:1, and was compliant with all financial covenants, indicating a healthy ability to meet its short-term and long-term financial obligations.