Zoetis Inc.

Welcome to the fourth quarter and full year 2025 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 managed by you, the viewer, and 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 zoetis.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 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. 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. It is now my pleasure to turn the floor over to Steve Frank. Steve, you may begin.

Thank you, operator. Good morning, everyone, and welcome to the Zoetis 2025 full year and fourth quarter earnings call. I am joined today by Kristin Peck, our chief executive officer, and Whitney Joseph, our chief financial officer. Before we begin, I'll remind you that the slide 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 statements 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 US 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 the company's 8-K filing, dated today, Thursday, February 12, 2026. 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, and good morning, everyone. Welcome to our fourth quarter and full year 2025 earnings call. For the full year on an organic operational basis, we delivered 6% revenue growth and 7% growth in adjusted net income in line with expectations. International markets were again a key contributor, delivering 8% organic operational revenue growth while the U.S. delivered 4% organic operational growth, reinforcing the value of our global footprint. By species, livestock delivered 8% organic operational revenue growth, benefiting from a more focused portfolio following the MFA divestiture. Companion animal grew 5% operationally, reflecting the strength of our diverse and durable portfolio. In 2025, we executed with discipline and delivered growth across the portfolio against the backdrop of a dynamic operating environment shaped by macroeconomic and competitive pressures. Importantly, our execution further strengthened the foundation for what's next, from advancing long-acting approvals and a robust pipeline that extends our growth runway, to strategic actions that sustain growth through competition, to sharpening focus in livestock post-MFA, and strengthening our commercial and medical capabilities globally. Before highlighting our performance drivers for the year, I just want to share what we've seen in the U.S. since our third quarter call. as these dynamics show up across the portfolio. In the veterinary channel, we continue to see some economic pressure on Gen Z and millennial pet owners, which has contributed to a decline in therapeutic visits and doses. At the same time, emergency and urgent care continue to show strength, which reinforces our view that this is not a decline in underlying demand for care, but rather greater price sensitivity and tighter household budgets when it comes to the cost of routine care. We are beginning to see clinics react to this environment by taking a more measured approach to the overall cost of care for pet owners. We are also operating in a more competitive landscape, including elevated promotional launch activity, which historically has not been sustainable. In response, we are taking targeted actions to offset these pressures by optimizing our channel mix, increasing weekend frequency with veterinarians, while reinforcing our scientific leadership through expanded medical education. But stepping back, these near-term dynamics are unfolding within a broader U.S. macro environment that we believe will gradually improve as we move through 2026. And some of our veterinary partners are even beginning to reengage in acquisitions and de novo clinic development. The continued expansion of retail-based clinics, standalone hospitals, and urgent and specialty care centers reflect evolving pet ownership dynamics and the emergence of new operating models across the industry. These trends underscore a market that is adjusting and evolving, even as pressures persist. And despite these near-term headwinds in the U.S., Zoetis continues to lead across key brands. Our portfolio continues to be differentiated by the pace and scale of our innovations. With more than 185 geographic expansions and lifecycle innovations in 2025, we expanded access to proven therapies, addressed additional unmet medical needs, and strengthened our foundation for future growth as the operating environment evolves. Turning to our performance drivers, our Semperica franchise grew 12% operationally for the year, with double-digit performance in both the U.S. and international markets. Trio continued to be a key driver, growing 13% operationally. In the U.S., sales surpassed $1 billion, with continued gains at initiation and the highest puppy share in the clinic. Globally, Trio maintained its position as the number one selling canine brand, reinforcing its position as the standard of care for broad-spectrum coverage in the fastest-growing parasiticide segments. That performance also reflects the strength of our omni-channel strategy, helping us navigate headwinds in the clinic. By ensuring our products are available wherever customers want them, we continue to grow with double-digit contributions from retail and home delivery, supporting improved compliance and positioning us well as customers weigh convenience, access, and value across channels. Head parasiticides remain the largest category in companion animal health, And despite an increasingly competitive market, this Imperica franchise gained share globally in 2025. Our key dermatology franchise grew 6% operationally for the year, with strong international contributions reflecting the durability of the category we built. The breadth and differentiation of our portfolio continue to support veterinarian choice, pet owner compliance, and consistent patient outcomes. While the category is competitive and expected to remain so, We are executing with focus through direct-to-consumer investment, applicable chewable conversion, and targeted outreach to OTC users. That dynamic is especially evident internationally, where continued category expansion and rising awareness are driving adoption and reinforcing long-term franchise competence. With a large untreated population globally and a clear preference for a proven, trusted therapy, we are competing for a position of strength. built on portfolio diversity and scale. Innovation is central to our strategy, and as we discussed during our innovation webcast, our near-term pipeline is positioned to provide significant growth catalysts and opportunities to drive value. Turning to OA Payne, the fan drive declined 3% operationally for the year, and we remain committed to returning it to growth. We continue to see strength in the feline opportunity, with Silencia growing 7% operationally. Last year's market approvals of Portela will expand our portfolio in 2026, enhancing our long-term ability to address OA pain in cats across different patient needs. While Labrella declined 6% operationally, we continue to advance our multi-pronged strategy, anchored in education, ensuring veterinarians and pet owners clearly understand the benefit-risk profile. We are seeing signs that our strategy is working, supported by stabilizing monthly sales trends and veterinarian and pet owner satisfaction. Overall, we remain confident in the long-term strength of LaValla, grounded in a significant unmet need, the meaningful impact it is having for dogs and the veterinarians who treat them, and the introduction of Lanivia, which will further expand our ability to support OA pain management across the stages of disease and patient profiles. And as we advance our OA pain franchise, we continue to engage in ongoing dialogue with regulators around the world to closely monitor and evaluate adverse events, support the safe and effective use of the product, and ensure prescribing information remains up to date. Companion Animal Diagnostics delivered broad-based 13% operational revenue growth for the year, even with ongoing pressure on clinic visits. This is another example of why portfolio balance matters. particularly in a dynamic operating environment. It also reinforces the success of our innovation strategy, including AI-enabled capabilities. In 2025, we expanded our diagnostics portfolio with the launch of VetScan OptiCell, bringing faster, simpler in-clinic hematology to veterinary practices, and AI masses, broadening the VetScan images menu, each contributing to a strong platform performance for the year. Similarly, we broadened our laboratory footprint across the UK and Ireland with the acquisition of Veterinary Pathology Group in November. We expect this momentum to continue alongside the anticipated launch of our next generation chemistry innovation in 2026. Our diagnostics business strengthens the portfolio today and expands the opportunity over time as we pioneer new diagnosis-driven therapeutic areas. Turning to livestock, we delivered 8% organic operational revenue growth for the year, with especially strong double-digit contributions internationally. Growth was broad-based across species and geographies, with momentum in key cattle and swine markets driven by consistent demand and solid execution throughout the year. Poultry contributed double-digit growth driven by focused post-MFA execution, strengthened biologics, key account penetration, and geographic expansion of Percerta. Aquaculture also delivered especially strong growth, driven by continued mortitella demands, underscoring the importance of disease prevention and the benefits of scale in a high-stakes production environment, as fish remain one of the fastest-growing sources of protein globally. In 2025, our R&D leadership delivered important conditional approvals for HPAI and New World Screwworms, reinforcing our ability to address critical challenges facing producers. we continue to believe the long-term fundamentals in livestock are strong. Globally, protein consumption continues to grow alongside GDP and rising incomes. While in the U.S., surging GLP-1 use and updated nutritional guidance are expected to drive demand for meat and dairy. That shift reinforces the connection between the accessibility, affordability, and safety of the food on our plate and animal health. underscoring the importance of the industry's ongoing shift from treating disease to preventing it altogether. These dynamics play to the strength of our portfolio, and we expect continued momentum. Looking ahead to 2026, we are guiding to a range of 3 to 5% organic operational revenue growth and expect 3 to 6% organic operational growth and adjusted net income. This outlook reflects our confidence and our ability to execute across the portfolio while navigating macroeconomic and competitive pressure, which we expect to moderate as the year progresses. The essential and resilient nature of animal health, together with secular trends such as an aging pet population and meaningful unmet need, provide a durable foundation for growth. In closing, 2025 was a year of meaningful progress across our portfolio and pipeline, with important innovations delivered to customers and continued advancement of a focused strategy. we have been deliberate about where to invest, how to compete, and how to scale innovation in ways that are designed to endure a cross cycle. Today, Zoetis has the industry's most diverse portfolio and a robust pipeline, with 12 potential blockbusters in development, which for us are products with at least $100 million in annual revenue, including innovations that are pioneering entirely new categories of care. Guided by our purpose and our commitment to addressing unmet medical needs, We are not only advancing science, but helping shape the future of animal health. As the operating environment continues to evolve, Zoetis is competing for a position of strength, grounded in a differentiated science-to-scale model, trusted brands, global scale, and deep, long-standing customer relationships. In 2026 and beyond, our focus remains on a disciplined execution and building on the capabilities we've put in place to drive durable, long-term growth and value creation. And before turning it over, I want to extend my deepest thanks to our purpose-driven colleagues around the world for their unwavering commitment to customers. With that, I'll pass it over to Wetni before taking your questions.