Zoetis(ZTS) - 2024 Q2 - Quarterly Report

Revenue Growth - Total revenue for the three months ended June 30, 2024, increased by $181 million, or 8$243 million, or 11%[81] - For the six months ended June 30, 2024, total revenue increased by $371 million, or 9$482 million, or 12%[81] - Revenue for the three months ended June 30, 2024, was $2,361 million, an 8$2,180 million in the same period of 2023[82] - Revenue for the U.S. segment increased by $143 million, or 12$121 million increase in companion animal products and a $22 million increase in livestock products[106] - International segment revenue increased by$40 million, or 4%, in Q2 2024 compared to Q2 2023, with operational revenue growth of $101 million, or 10$2,471 million compared to $2,170 million in the same period of 2023[107] - International segment revenue increased by$69 million, or 3%, in the six months ended June 30, 2024, compared to the same period in 2023[111] Operational Performance - Price growth contributed approximately 8% to the operational revenue increase for the three months ended June 30, 2024[81] - Volume growth from new products accounted for approximately 3% of the operational revenue increase for the three months ended June 30, 2024[81] - Adjusted net income for the six months ended June 30, 2024, was $1,345 million, compared to$1,259 million in the same period of 2023, reflecting a 7% increase[73] - Adjusted net income for the three months ended June 30, 2024, was $711 million, a 9$652 million in the same period in 2023[122] - U.S. segment earnings increased by $275 million, or 20$3 million, or 1%, in the three months ended June 30, 2024, compared to the same period in 2023[109] Costs and Expenses - Cost of sales for the three months ended June 30, 2024, was $668 million, representing 28.3$25 million, or 4%, to 581 million for the three months ended June 30, 2024[87] - Research and development (R&D) expenses rose by 25 million, or 17%, to $171 million for the three months ended June 30, 2024[91] - Cost of sales for the six months ended June 30, 2024, was$1,311 million, maintaining 28.8% of revenue, compared to 28.6% in the same period of 2023[85] - Corporate expenses increased by $123 million, or 27$111 million, or 6%[111] - The company is facing higher foreign currency losses in the current period, which affected the overall financial performance[100] - A significant portion of the company's revenue and costs are exposed to changes in foreign exchange rates[143] Tax and Earnings Per Share - The effective tax rate for the three months ended June 30, 2024, was 20.0%, down from 23.2% in the same period of 2023[82] - The effective tax rate decreased to 20.0% in Q2 2024 from 23.2% in Q2 2023, primarily due to lower net discrete tax expenses and a more favorable jurisdictional mix of earnings[102] - The effective tax rate on adjusted pretax income was 20.1% for the three months ended June 30, 2024, compared to 21.5% for the same period in 2023[121] - GAAP reported diluted EPS for Q2 2024 was $1.37, a decrease of 6$1.45 in Q2 2023; non-GAAP adjusted diluted EPS increased by 11% to $1.56 from$1.41[123] - For the six months ended June 30, 2024, GAAP reported diluted EPS was $2.67, up 1$2.64 in the same period of 2023; non-GAAP adjusted diluted EPS rose by 8% to $2.94 from$2.71[123] Cash Flow and Financial Position - Net cash provided by operating activities for the six months ended June 30, 2024, was $1,097 million, an increase of$365 million from $732 million in 2023[129] - The company reported a net decrease in cash and cash equivalents of$(467) million for the six months ended June 30, 2024, a significant improvement from $(1,864) million in 2023[129] - Net cash used in investing activities decreased to$263 million for the six months ended June 30, 2024, compared to $296 million in the same period of 2023, mainly due to capital expenditures[131] - Net cash used in financing activities reduced to$1,287 million for the six months ended June 30, 2024, down from $2,296 million in the same period of 2023, primarily due to treasury share purchases and dividend payments[132] - Cash and cash equivalents decreased to$1,574 million as of June 30, 2024, from $2,041 million as of December 31, 2023[135] - Long-term debt remained stable at$6,563 million as of June 30, 2024, compared to $6,564 million as of December 31, 2023[135] Risks and Challenges - The company faces risks from competing products, including generic alternatives, which may impact its market position[142] - Unanticipated safety, quality, or efficacy concerns about the company's products could adversely affect performance[142] - The company is subject to fluctuations in global economic conditions, including inflation and regional conflicts[142] - Legal factors, including product liability claims and antitrust litigation, may negatively impact profitability[142] - The company is at risk of cyberattacks and information security breaches that could compromise data[142] - The company must generate sufficient cash to service its substantial indebtedness[142]