Zoetis Inc.

Welcome to the second quarter 2020 financial results conference call and webcast for Zoetis. Hosting the call today is Steve Frank, Vice President of Investor Relations for Zoetis. The presentation materials and additional financial tables are currently posted on the Investor Relations section of Zoetis.com. The presentation slides can be named by you, the viewer, and will not be forwarded automatically. In addition, a replay of this call will be made available approximately two hours after the conclusion of this call via dial-in or on the investor relations section of zoetis.com. At this time, opposite screens have been placed in a listen-only mode, and the floor will be open for questions following the presentation. If you would like to ask a question at that time, please press star 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, then queue up again with any follow-up. 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 require any operator assistance, please press star zero. It is now my pleasure to turn the floor over to Steve Frank. Steve, you may begin.

Good morning, everyone, and welcome to the Zoetta Second Quarter 2020 Earnings Call. I am joined today by Kristen Peck, our Chief Executive Officer, and Glen 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 10-2. 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 8-K filing dated today, August 6, 2020. We also cite operational results, which exclude the impact of foreign exchange. With that, I will turn the call over to Kristen.

Thank you, Steve. Good morning, everyone. I hope you and your loved ones remain safe and healthy as the COVID-19 pandemic continues to affect all of our professional and personal lives. On the call today, we will provide additional context around the impact of COVID-19 is having on our business, summarize the quarterly financial results, update you on our outlook, and leave plenty of time to address your questions. In the second quarter, we delivered better than expected results given uncertainty around the COVID-19 pandemic. And I want to thank all of our Zoetis colleagues who have shown amazing resiliency, customer focus, and perseverance throughout the year in a response to these challenging times. In terms of numbers, our revenue grew 4% operationally, with the U.S. segment up 6% and international up 3%. Our companion animal products continued to drive our business performance, with 13% operational growth, while livestock products declined 5%. Our adjusted net income increased 4% operationally in the second quarter. We have built a very strong companion animal portfolio over the last several years based on our internal innovation. And these products have helped offset some of the deeper market challenges in the livestock market today. Our recently launched parasiticides, Comparica Trio, Pro Heart 12, and Revolution Plus, as well as our key dermatology portfolio of Apoquel and Cytopoint, provide a solid foundation that has continued to form well this year. We continue to be very pleased with the performance of our new triple combination parasiticide for dogs, Semperica Trio, as well as the strength of the overall Semperica franchise. Glenn will share more details in his remarks. Our continued focus on meaningful innovations and the diversity of our portfolio across species, products, and geographies remain core advantages for Duetis during times of economic uncertainty. and we've also seen the essential nature of animal health playing an important role in the resiliency of our business and our industry at this time. In terms of COVID-19, our veterinary and producer customers are under increased pressure to deliver critical animal care and maintain a reliable global food supply, and we are fortunate to be able to support them in this mission. We continue to put the safety of our colleagues and customers first during this pandemic. And we've been very pleased with our team's ability to maintain productivity, even with safety and social distancing adjustments at our facilities, as well as the ongoing use of remote work arrangements for the majority of our colleagues. Our field force has returned to meeting with customers in many geographies based on local guidance and practices. We monitor and adapt these plans on a daily basis based on local feedback and adjustments in markets that may be experiencing increased COVID-19 cases. Our teams are excited to be back out with our customers, but we're also preserving the lessons we have learned from effective online interactions, webinars, and e-commerce to evolve our sales and support. In terms of supply chain, Zoetis has maintained a reliable inventory of critical medicines, vaccines, and diagnostics to our customers and distributors in more than 100 markets around the world. And our research development programs remain on track in terms of filings, clinical trials, and interactions with regulatory agencies. We remain confident in the progress of regulatory reviews of our monoclonal antibody candidates for pain in cats and dogs. Our submissions are proceeding as expected. This year continues to be uncharted territory due to COVID-19 and the related trends affecting our customers. However, the underlying demand for healthy pests and a reliable source of protein remains fundamental to the global economy. In the second quarter, we benefited from the veterinary clinics in the U.S. recovering much more quickly from the COVID-19 impact than we anticipated. Veterinary practices in the U.S. adapted quickly to curbside visits and mobile clinics to deliver critical care and maintain relationships with their customers. We also saw an acceleration of companion animal product sales through e-commerce channels as a result of the lockdowns in many states. Veterinarians and pet owners are adapting more quickly to these online options as a way to fill prescriptions for parasiticides and other medicines. We also know people are spending more time at home with their pets. They may be observing conditions such as itchiness or pain, which had previously gone unnoticed, and so we are actually seeing an increase in spend per visit in U.S. clinics. Meanwhile, outside the U.S., companion animal veterinary clinic performance has been in line with expectations, despite wide market-by-market variations based on local dynamics. For Zoetis, we expect our overall revenue growth for the remainder of the year to be driven largely by companion animal products, especially our parasiticides and key dermatology portfolio. We plan to continue investing in direct-to-consumer advertising and digital marketing to support these products. Livestock is a very different picture and remains very challenged by the pandemic, especially in the U.S. Producers are adjusting to new market demands and distribution needs, from food service and restaurant channels to more grocery and retail channels, while also managing ongoing labor, safety, and trade issues. As expected, U.S. livestock in the second quarter saw a significant downturn as we expect that to remain a challenge for the rest of the year. The pace of return to more food service and restaurant demand along with increased export opportunities will be the most significant factors in the recovery of livestock producers in the U.S. Internationally, livestock grew and performed in line with expectations across a diverse set of markets. We saw very positive results in places like China, where they are further along in their COVID-19 recovery. But we will be sensitive to see how Latin America and markets like Brazil perform in the remainder of the year due to COVID. As we look ahead, we remain focused on advancing our five key priorities to ensure our long-term success. Driving innovative growth, enhancing customer experience, leading in digital and data analytics, cultivating a high-performing organization, and championing a healthier, more sustainable future. We've continued to make important investments in products and innovations across the continuum of care, from prediction and prevention to detection and treatment of disease. Supporting successful launches, as well as new lifecycle innovations and expansions of major products into new markets, continue to be the cornerstones of our durable and steady performance. In the second quarter, we expanded major vaccine franchises with the approval of our Vanguard B oral for dogs in Brazil and our Frustera Gold PCV-MH and Frustera Gold PCV-Medistim for vaccines for pigs in Australia. We also continue to strengthen our diagnostic and digital capabilities, building on recent acquisitions in point of care and reference labs, along with additional investments. we plan to launch a new diagnostic platform for pet care in the third quarter called VetScan Imagist. We are very excited about the potential for this disruptive innovation, which will be the first system to bring clinical pathology right to the point of care. This new multi-purpose platform uses a combination of image recognition technology, algorithms, and cloud-based artificial intelligence to deliver rapid testing results to the clinic. Its first indication will be for testing fecal samples for parasites, making it quick and easy to test and treat pests in the same visit. We'll have more to say in the coming weeks as we prepare for a global launch. We also view diagnostics as playing an important role in the continuum of care for fish. In the second quarter, we acquired Fish Vet Group to add more diagnostic tools to our aquaculture portfolio, including environmental testing, which is critical to fish farming. Finally, at Zoetis, our key priority around high-performing teams is tied to creating a culture where all colleagues feel valued and included, and is reflected in our commitment to promoting inclusion, diversity, and equity across our organization. Our leadership and board are dedicated to being a force for positive change across the globe to drive greater equity and inclusion, and we have dedicated financial and people resources to do so. As part of this plan, we have made commitments to publish our diversity statistics and to increase our representation of Black colleagues and people of color overall in the U.S. As the world leader in animal health, we are committed to demonstrating our leadership on this important business and social issue. Now, let me hand off to Glenn, who will speak more about our second quarter results and updated guidance for the full year. Glenn?