PetIQ, Inc.

Good day and welcome to the PetIQ Inc. fourth quarter and full year 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Katie Turner, Investor Relations. Please go ahead.

Good afternoon. Thank you for joining us on PetIQ's fourth quarter and full year 2022 earnings conference call and webcast. On today's caller, Cord Christensen, Chairman and Chief Executive Officer, and V. Gossman, Chief Financial Officer. Before I begin, please remember that during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual events or those described in these forward-looking statements. Please refer to the company's annual report on Form 10-K and other reports filed from time to time with the Securities and Exchange Commission and the company's press release issued today for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note on today's call, management will refer to certain non-GAAP financial measures. While the company believes these non-GAAP financial measures will provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's release for reconciliation of non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP. In addition, PetIQ has posted a supplemental presentation on its website for reference. And with that, I'd like to turn the call over to Corey Christensen.

Thank you, Katie, and good afternoon, everyone. Before I begin, I'd like to apologize for my head cold and this crazy voice I'm presenting today. We appreciate you joining us today to discuss our full year 2022 and fourth quarter financial results. I'll begin with an overview of key highlights, then Zee will review our financial results for the quarter and outlook. Finally, Zee, Michael, and I will be available to answer your questions. We are very pleased to deliver a full year 2022 net sales and adjusted EBITDA in line with our stated guidance. Importantly, we had a record cash generation with cash from operations of $48 million and free cash flow of $36.1 million for the year ended December 31st, 2022. We benefited from consumption of our higher margin PetIQ manufactured brands and strategic investments behind new products like Nexstar and our existing brands, Capstar and PetArmor. Similar to prior quarters, in Q4, we experienced consumer trade down from premium to more value-oriented health and wellness products. And while the total flea and tick category was down in both Q4 and for the 2022 full year, PetIQ has captured a disproportionate amount of market share and dramatically outperformed the broader category. We believe PetIQ's unique position in the market, offering convenient and affordable veterinarian products and services, has never been more valuable and needed by pet parents. Turning to our product segment in more detail, our PetIQ manufactured products outperformed the broader category in Q4. We generated sales growth across five of our top seven manufactured product categories during the quarter. These five categories collectively generated 14% sales growth versus Q4 2021. When looking at our growth in all sales channels, a few of the highlights from the quarter include pet supplements consumption increased 14% for Q4 as compared to the broader category, which was up 8% compared to the prior year period. This led to 76 basis points of share expansion. In addition, our dog treats grew 43%, dental treats increased 38%, cat treats increased 32%, and dewormers increased 17% when all are compared to Q4 of last year. We continue to participate and be a leader in several of the largest growing categories within the pet industry, such as flea and tick solutions and health and wellness. Our manufactured over-the-counter flea and tick results continue to outperform soft category conditions in Q4. For the 12-week period ending December 21, 2022, consumption for our brands was down 0.8%, significantly better than the total category that was down 5.1% when compared to the same period last year. Keep in mind, Q4 of 2021 was an exceptionally strong flea and tick quarter due to the unusually late winter creating an abnormal comparison for this year. Above category growth led to 81 basis points of share gain driven by our outperformance within e-commerce where we posted growth of 11.1% and picked up 96 basis points of share within the channel. Our flea and tick brand Nexstar that we launched in 2022 continued to help drive our share growth. The successful growth of Nexstar represents the largest brand launch into the over-the-counter flea and tick category over the past five years and now has almost a 2% share of the category based on the same 12-week period data. E-commerce continues to play an important role for us as consumers choose where and when they want to shop for their pet products through both our retail partner offerings online and our e-commerce partners. In Q4, over 45% of the over-the-counter flea and tick category sales were generated online, and at PetIQ, we have grown to generate a similar amount of our product segment sales via e-commerce. We expect e-commerce to represent an even larger percentage in 2023. As a reminder, This means Nielsen data is often not a good representation of how our products business is performing. Especially when you consider we also have a strong presence in the club channel and e-commerce is approaching 50% of product sales, both which are not fully measured by Nielsen. Our manufactured over-the-counter health and wellness products also delivered great results. For the full year 2022, our manufactured brands outperformed the brands we distribute. PetIQ manufactured products represented 29.3% of our product segment net sales in 2022, which is up from 27.7% in 2021. This is right in line with our expectations for approximately 30% of our product segment sales for 2022. For 2023, we continue to expect to grow our PetIQ manufactured brand contribution based on the initiatives Michael Smith and team have in place. We believe our manufactured brands could grow to approximately 32% of our product segment net sales in 2023. We continue to have the largest over-the-counter animal health brand portfolio with over 1,000 SKUs and a dominant market share in pet prescription and over-the-counter products sold through retail and online. Now, focusing on the services segment, our services segment reported 2022 net revenue of $121.2 million, an increase of 13%, as compared to the prior year and in line with our expectations. This growth for the year and our net revenue growth in Q4 both demonstrate that we continue to generate growth that outpaces the broader market veterinarian traffic trends. Our team remains focused on vet recruiting with the addition of 17 new veterinarians in Q4. This is our best quarter for vet recruitment since Q1 of 2022. We're also very excited to report a significant improvement in our mobile clinic cancellation rate At the end of Q4 and into Q1, for the first time since March of 2020, we were at a single digit rate of cancellation. Cancellations happen when we have a scheduled clinic and we cancel it due to a veterinarian not being available to work. Our community clinic veterinary labor pool has also recovered significantly. We now have contract labor veterinarians in line with the number of veterinarians we had in 2019. We opened 24 new wellness centers for the year. seven of which were opened in the fourth quarter of the year. We will continue to remain prudent with our services segment growth in 2023. Subsequent to the end of the year, on January 13th, 2023, the company acquired Rocco & Roxy, a complimentary margin-accretive pet company with a strong and growing brand awareness, particularly in e-commerce. We have known the family and founders of Rocco & Roxy for years and are very impressed with their ability to build an attractive, and growing pet business with 29 million in net sales for the year ended December 31st, 2022. Rocco and Roxy's pet product offering today primarily includes stain and odor products, jerky treats, and behavior products. Rocco and Roxy's number one selling item is a top 10 pet SKU at a leading e-commerce partner with very little ACV percent across traditional brick and mortar retail. We believe we have a tremendous opportunity to grow Rocco and Roxy's distribution beyond e-commerce to brick and mortar retail to accelerate growth of their existing pet product offerings and to introduce new SKUs in 2023 and beyond. We believe we are well positioned across our product and services segments to attract more pet parents to our health and wellness offerings. In closing, on behalf of our management team, I'd like to thank our dedicated employees for their hard work and commitment to our mission. Everyone has done a great job to adjust to changes in the operating environment and help us to achieve these financial results. With that overview, I would like to now turn the call over to Steve.