Zoetis Inc.

Welcome to the first quarter 2020 financial results conference call and webcast for Zoletus. Hosting the call today is Steve Frank, Vice President of Investor Relations for Zoletus. The presentation materials and additional financial tables are currently posted on the investor relations section of zoletus.com. The presentation slides can be managed by you, the viewer. It will not be forwarded automatically. In addition, a replay of this call will be available approximately two hours after the conclusion of this call via dial-in or on the investor relations section of Zoletus.com. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star and 1 on your touch-tone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. In the interest of time, we ask that you limit yourself to one question and then queue up again with any follow-ups. Your line will be muted when you complete your question. When posing your question, please pick up your handset to allow optimal sound quality. Lastly, if you should require operator assistance, press star zero. It is now my pleasure to turn the floor over to Steve Frank. Steve, you may begin.

Thank you. Good morning, everyone. I hope you are all doing well. Welcome to the Zuleta's first quarter 2020 earnings call. I am joined today by Kristen Peck, our chief executive officer, and Glenn David, our chief financial officer. Before we begin, I'll remind you that the slides presented on this call are available on the investor relations section of our website, and that our remarks today will include forward-looking statements, and that actual results could differ materially from those projections. For a list and description of certain factors that could cause results to differ, I refer you to the forward-looking statement in today's press release and our SEC filings, including but not limited to our annual report on Form 10-K and our reports on Form 10-Q. Our remarks today will also include references to certain financial measures which were not prepared in accordance with generally accepted accounting principles or U.S. GAAP, a reconciliation of these non-GAAP financial measures, to the most directly comparable U.S. GAAP measures is included in the financial tables that accompany our earnings press release and in the company's 8K filing dated today, May 6, 2020. We also cite operational results, which exclude the impact of foreign exchange. With that, I turn the call over to Kristen.

Thank you, Steve. Good morning, everyone. I hope you and your families are staying healthy and safe. I think it's fair to say the past few months have been unlike any we've ever experienced in business or that any of us could have imagined for our families, friends, and communities. The global COVID-19 pandemic has had such an incredible impact on our world and for many of us personally. It has given me a chance to reflect not just on the financial numbers we reported today, but on the true value our business provides society, the role we play in public health, the support we deliver for our customers in crisis, and the safety and security we provide to our colleagues. For Zoetis, we're privileged to play an essential role in sustaining and protecting animal and human life during the outbreak. Our products and services play a critical part in animal health, helping support pet care and the food supply, and we've continued to manufacture products and serve customers, even in places that have imposed stringent limits on businesses in the wake of the coronavirus. Our colleagues are more committed than ever to supporting the nutrition and comfort that animals provide the world, and that purpose has motivated us to continue serving our customers and communities in these extraordinary times. I'm especially proud of the efforts of Zoetta's colleagues in supporting our local communities, healthcare workers, and businesses during the outbreak. We've been contributing surplus personal protective equipment from our operations. We've been increasing production of human health diagnostics and answering requests from local hospitals for a variety of assistance. As far as the direct impact of COVID-19 on our colleagues, we've been fortunate to see only a small number of COVID-19 cases in our workforce of more than 10,000 colleagues, thanks to increased safety measures, hygiene protocols, and adjustments to our operations. About 70% of our colleagues today are working remotely. They are being productive as they adjust to new arrangements, juggle new home and family responsibilities, and benefit from the use of technology infrastructure that we've invested in and continue to enhance at this time. The other 30% of our colleagues are working at our sites, supporting essential operations such as manufacturing, distribution and logistics, clinical trials and research, and technical services and support for customers. Our Teams and Zoetta sites are adhering to strict health and hygiene protocols recommended by the WHO and CDC. They are practicing social distancing, operating in staggered shifts, and participating in health monitoring, all as part of the adjustments we have made at each plant to limit potential exposure. Our 30 manufacturing sites remain open around the globe today, and we've been able to maintain supply of critical product inventories. We've also shown excellent agility to deal with the local market changes in terms of border control, regulatory changes, and freight operations. I am also pleased to say that even under these difficult circumstances, we were able to meet our launch timing for Simperica Trio, our highly anticipated triple combination parasiticide. We launched Empirica Trio in the UK, Spain, and Italy in February, made initial shipments for distribution in the U.S. in March, and initiated a full launch in the U.S. and Canada in April, with more markets to follow. We've seen significant interest in Trio, and we've been supporting its introduction with consumer ads in the U.S. this spring. While we're excited by the introduction and the receptiveness of customers and pet owners, We've had to revisit full-year projections for Sempericatrio, given the expected impact of COVID-19 and the recession. Glenn will speak more to this in his remarks. We are grateful we've been able to keep our major R&D programs on track. We continue to advance our research in key areas, such as monoclonal antibodies for ophioceratitis pain in cats and dogs, and vector vaccines for poultry. We're continuing with regulatory reviews, commissions are going in, and we're maintaining momentum on our most critical projects for the future, all while keeping colleagues safe. From a P&L perspective, in the first quarter, the pandemic had a limited impact on our results given the February quarter end for our international markets and the timing of shelter in place across the U.S. We generated 7% operational growth in revenue and 10% operational growth in adjusted net income thanks to the strength of our diverse portfolio and global scope of our business. We expect a more significant revenue impact from COVID-19 in Q2 and for the year, as the lockdowns and recession have a continued impact on our business, especially in terms of traffic at companion animal clinics and reduction in demand for protein from their restaurant and dine-out sectors. We will need to watch carefully how the reopening of various markets in the coming weeks impacts veterinary services for companion animals as well as livestock. Glenn will discuss 2020 guidance in more detail in a few minutes, but I'm pleased to share that Zoetis remains a resilient company at times like these, given the essential nature of our business and our diverse portfolio. In most markets, our sales teams are working virtually to respect local government guidance and limit potential exposure of COVID-19 for colleagues and customers. We've been keeping in regular contact with our customers through phone calls, video conferences, webinars, and surveys, and we're responding as best we can to anticipate and address their most important needs. We are here to help them maintain critical care and supply for their customers at this time. and adapt to a new normal for the future of animal care. For example, we've been advising customers on increasing digital content for their use with pet owners, offering telemedicine solutions through new partnerships, discussing their liquidity concerns, offering continuing education for veterinary staff, and providing technical support services to deal with adjustments being made to food production. We are seeing many of the trends you are, in terms of animal health and food supply, as well as decreased traffic to veterinary practices. But history tells us that animal health medicines, vaccines, and other products remain essential, even in a challenging economy. On the last back side of the business, the need for food hasn't gone away. But with restaurants and hotels closed, consumer demand has shifted to supermarkets. There's less demand for beef and dairy products, while poultry remains strong as people choose less expensive proteins. As with every frontline business today, the biggest challenge our livestock customers are having is maintaining their operations with enough healthy workers to handle processing, packing, and delivering food. On the pet side of the business, veterinary traffic is down in places where containment measures are in place. Now, many vets are leveraging curbside check-ins, home visits, telemedicine, and online pharmacy distribution to take the place of incoming visits. As you look ahead, our business continuity plans are working well, and we continue to show great agility and responsiveness to this crisis. We are carefully managing our expenses and doing scenario planning for the medium and long term, including hiring freezes and reductions to discretionary spending, such as travel, entertainment, and consulting. We have not had to engage in furloughs or salary reductions for our colleagues, thanks to the resiliency and diversification of our business and our strong balance sheet. We continue to regularly assess any long-term needs, depending on the duration of the pandemic and the resulting recession. Like all companies, we've begun planning for the days when more of our colleagues will return to the workplace. Over the last few months, we have safely maintained operations in our manufacturing, distribution, and R&D facilities to ensure continuous supply to our customers while maintaining strict quality standards and keeping our colleagues safe. We plan to leverage these enhanced policies and procedures for a phased return to work that helps ensure the safety of not just our colleagues but the customers they interact with in the field. I am proud of our teams for their resourcefulness. flexibility, and commitment to colleagues and customers. Their efforts are helping us to envision an even better way to work over the long term. When we began this year, my first as CEO, I laid out five priorities for Zoetis, and those are as relevant today as they were then. Our priorities remain driving innovative growth, enhancing customer experience, leading in digital and data analytics, cultivating a high-performing organization, and championing a healthier, more sustainable future. As we manage through the crisis to this new normal, we will find relevant new ways to adapt our strategies and tactics for the future. Even in the midst of COVID-19, we continue to act on opportunities to advance these priorities. Since February, we received approval of Semper Catrio in the U.S. and Australia, and have launched it in several markets with the support of direct-to-consumer advertising and digital marketing where applicable. We acquired Performance Livestock Analytics, a company which brings us proven cloud-based management systems and data analytics for beak producers. And we announced Pumpkin, a new pet health startup that's offering pet insurance and preventative care in the U.S. Once again, I'm very proud of the results we've been able to deliver this quarter, and I look forward to your questions. Now, let me hand over to Glenn for more detail on the first quarter results and our updated view for the rest of 2020. Glenn.