Zoetis Announces Third Quarter 2023 Results Reports Revenue of $2.2 Billion, Growing 7%, and Net Income of $596 Million, or $1.29 per Diluted Share, Increasing 13% and 14%, Respectively, on a Reported Basis for Third Qua

Zoetis Announces Third Quarter 2023 Results

Reports Revenue of $2.2 Billion, Growing 7%, and Net Income of $596 Million, or $1.29 per Diluted Share, Increasing 13% and 14%, Respectively, on a Reported Basis for Third Quarter 2023

Delivers 8% Operational Growth in Revenue and a 13% Operational Growth in Adjusted Net Income for Third Quarter 2023

Reports Adjusted Net Income of $629 Million, or Adjusted Diluted EPS of $1.36, for Third Quarter 2023

Updates Full Year 2023 Revenue Guidance Range of $8.475 - $8.550 Billion Due to the Impact of Foreign Exchange Rates

Narrows Full Year 2023 Guidance for Operational Revenue Growth to a Range of 6.5% to 7.5% and Adjusted Net Income of 7.5% to 8.5%

PARSIPPANY, N.J. - November 2, 2023 - Zoetis Inc. (NYSE ZTS) today reported its financial results for the third quarter of 2023 and updated its guidance for full year 2023.

The company reported revenue of $2.2 billion for the third quarter of 2023, an increase of 7% compared with the third quarter of 2022. On an operational1 basis, revenue for the third quarter of 2023 increased 8% compared with the third quarter of 2022, excluding the impact of foreign currency. Net income for the third quarter of 2023 was $596 million, or $1.29 per diluted share, an increase of 13% and 14%, respectively, on a reported basis.

Adjusted net income2 for the third quarter of 2023 was $629 million, or $1.36 per diluted share, an increase of 11% and 12%, respectively, on a reported basis, and an increase of 13% and 15%, respectively, on an operational basis. Adjusted net income for the third quarter of 2023 excludes the net impact of $33 million for purchase accounting adjustments, acquisition-related costs and certain significant items.

EXECUTIVE COMMENTARY

"Today we reported strong third quarter results of 8% operational growth in revenue and 13% operational growth in adjusted net income, based on our diverse portfolio across markets and species, said Kristin Peck, Chief Executive Officer of Zoetis. "We showed balanced segment growth again this

quarter, with 8% revenue growth in the U.S. and 8% operational revenue growth internationally. Our companion animal portfolio grew 11% operationally, driven by our major franchises in dermatology, pet parasiticides, osteoarthritis pain and diagnostics. Our livestock portfolio grew 3% operationally, driven by sales of poultry and cattle products."

"We are on track to achieve our full-year operational guidance and have narrowed it around the mid-point of the range. We remain confident in the sustainable, underlying demand for animal health, as customers continue to place a premium on the animal health benefits our products deliver. We are executing well on drivers where we have more control, like the successful launch of Librela in the U.S., while also mitigating the downside of macroeconomic declines in China. Once again, our diverse portfolio across product categories and geographies provides us with durable, reliable, long-term growth."

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 third quarter of 2023

Revenue in the U.S. segment was $1.174 billion, an increase of 8% compared with the third quarter of 2022. Sales of companion animal products increased 11%, driven by the company's key dermatology portfolio, including Apoquel and Cytopoint , as well as the company's parasiticide product Simparica Trio . Also contributing to growth in the quarter was Solensia , a monoclonal antibody for osteoarthritis pain in cats, and the company's diagnostics portfolio of Vetscan products. Sales of livestock products declined 2% in the quarter. Sales of cattle products decreased primarily due to a difficult comparable period versus the same quarter last year. Sales of swine products declined in the quarter, as a result of lower disease prevalence and unfavorable market conditions. Declines in cattle and swine were partially offset by growth in the poultry portfolio due to vaccines and the expanded use of Zoamix , an alternative to antibiotic medicated feed additives (MFAs).

Revenue in the International segment was $956 million, reflecting an increase of 8% on both a reported and operational basis, compared with the third quarter of 2022. Sales of companion animal products grew 12% on both a reported and operational basis, despite declines in China. Growth in the quarter was driven by the company's monoclonal antibody products for osteoarthritis pain, Librela for dogs and Solensia for cats, as well as its key dermatology

products, Apoquel and Cytopoint. Also contributing to growth in the quarter were Simparica and Simparica Trio. Sales of livestock products grew 3% on a reported basis and 5% operationally. Growth in cattle was driven largely by price, improved supply and channel dynamics as well as strong market conditions in Brazil. Sales of poultry products experienced price increases across the international segment and MFAs grew in key regions. Sales in swine grew primarily from demand generation efforts in key and emerging markets.

INVESTMENTS IN GROWTH

Zoetis continues to grow key product franchises through additional claim extensions in major markets. In the third quarter, Simparica Trio (sarolaner moxidectin pyrantel), the company's triple combination oral parasiticide for dogs, received approval in Australia and Canada for claims related to efficacy against sarcoptic and demodectic manges. Simparica Trio also received approval for two additional claims in Australia - Otodectes cynotis and flea tapeworms. Additionally, Simparica (sarolaner) received approval in Canada for claims related to Otodectes cynotis mange.

Zoetis also continues to advance pain management and dermatology innovation for companion animals across the globe. With the October launch of Librela (bedinvetmab injection) and Apoquel Chewable (oclacitinib chewable tablet) in the U.S., three of the company's major franchises - including Solensia (frunevetmab injection) - are now available in most major markets around the world, with ongoing geographic expansion continuing in additional markets.

Zoetis is updating its full year reported 2023 guidance due to foreign exchange rates.

Updates revenue to between $8.475 billion to $8.550 billion (narrows operational growth to a range of 6.5% to 7.5%)

Updates reported net income to between $2.380 billion to $2.415 billion

Updates adjusted net income to between $2.490 billion to $2.515 billion (narrows operational growth to a range of 7.5% to 8.5%)

Updates reported diluted EPS of $5.14 to $5.21 due to the impact of foreign exchange rates

Updates adjusted diluted EPS between $5.38 to $5.43 due to the impact of foreign exchange rates

This guidance reflects foreign exchange rates as of late October. 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 third 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 November 2, 2023.

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.

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 R D costs timing and likelihood of success expectations regarding products, product approvals or products under development and expected timing of product launches 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 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.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME(a)

(millions of dollars, except per share data)

(a) The condensed consolidated statements of income present the three and nine months ended September 30, 2023 and 2022. Subsidiaries operating outside the United States are included for the three and nine months ended August 31, 2023 and 2022.

* Calculation not meaningful.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

(millions of dollars, except per share data)

(a) The condensed consolidated statements of income present the three months ended September 30, 2023 and 2022. Subsidiaries operating outside the United States are included for the three months ended August 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).

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

(millions of dollars, except per share data)

(a) The condensed consolidated statements of income present the nine months ended September 30, 2023 and 2022. Subsidiaries operating outside the United States are included for the nine months ended August 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).

NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

(millions of dollars)

(1) Acquisition-related costs include the following

(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

(a) For the three and nine months ended September 30, 2023, primarily consisted of employee termination and exit costs related to organizational structure refinements and other cost-reduction and productivity initiatives, included in Restructuring charges and certain acquisition-related costs.

For the three and nine months ended September 30, 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.

(b) For the three and nine months ended September 30, 2023, represents certain asset impairment charges related to our precision animal health and diagnostics businesses, primarily included in Other (income) deductions-net.

For the three and nine months ended September 30, 2022, represents inventory and certain asset impairment charges primarily related to the consolidation of manufacturing sites in China, included in Cost of sales and Restructuring charges and certain acquisition-related costs, respectively.

(c) Primarily 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 nine months ended September 30, 2023, a benefit from the tax loss on the divestiture of Performance Livestock Analytics, partially offset by a 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 nine months ended September 30, 2022, changes in valuation allowances.

ADJUSTED SELECTED COSTS, EXPENSES AND INCOME(a)

(millions of dollars)

(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.

The guidance reflects foreign exchange rates as of late October 2023.

Reconciliations of 2023 reported guidance to 2023 adjusted guidance follows

(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.

CONSOLIDATED REVENUE BY SEGMENT(a) AND SPECIES

(millions of dollars)

(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.

CONSOLIDATED REVENUE BY SEGMENT(a) AND SPECIES

(millions of dollars)

(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.

CONSOLIDATED REVENUE BY KEY INTERNATIONAL MARKETS

(millions of dollars)

(a) Operational revenue growth (a non-GAAP financial measure) is defined as revenue growth excluding the impact of foreign exchange.