Good day, 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 call are Cord Christensen, Chairman and Chief Executive Officer, and Zvi Glasman, Chief Financial Officer. Before we 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 today's release for reconciliation of non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP. In addition, PetIQ posted a supplemental presentation on its website for reference. With that, I'd like to turn the call over to Cord Christensen. Thank you, Katie. 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 Zvi will review our financial results for the quarter and outlook. Finally, Zvi, Michael, and I will be available to answer your questions. We are very pleased to deliver 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 NextStar 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. 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 of 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 continued to outperform soft category conditions in Q4. For the 12-week period ending December 21st, 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. The 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, NextStar, that we launched in 2022, continued to help drive our share growth. The successful growth of NextStar 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. 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 to retail and online. 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 veterinary and 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 are 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 veterinarian 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 & Roxie, a complementary margin accretive pet company with a strong and growing brand awareness, particularly in e-commerce. We have known the family and founders of Rocco & Roxie 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 31, 2022. Rocco & Roxie's pet product offering today primarily includes stain and odor products, jerky treats, and behavior products. Rocco & Roxie's number one selling item is a top 10 pet SKU at a leading e-commerce partner with very little ACV% across traditional brick-and-mortar retail. We believe we have a tremendous opportunity to grow Rocco & Roxie'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 Zvi. Thank you, Cord. We're pleased to deliver financial results in line with our expectations and record free cash flow generation. Today, I will go through certain key financials in more detail for the quarter and year-to-date periods. Q4 net sales were $184.1 million, which helped us achieve our full year 2022 net sales guidance. Net sales were down 6.4% compared to the fourth quarter last year, primarily due to lapping the fill orders from a successful new product launch and stronger than normal sales at the end of the flea and tick season in the fourth quarter of 2021. We also continued to experience consumer trade down from premium to more value-oriented pet health and wellness products in the fourth quarter of 2022. Keep in mind, Q4 is also our seasonally lowest sales quarter of the year. Importantly, we have seen an improvement in our product sales trend and are optimistic about our growth in 2023, which I'll review in more detail when I discuss our outlook. In our Services segment, net revenue increased 4.1% compared to the prior year period, as we benefited from improved revenue metrics and optimization of mobile clinics and wellness centers. As Cord mentioned, we are pleased with continued improvements to the service business in Q1. As we have outlined in our press release today and when we reported the third quarter of 2022, beginning this quarter, we are no longer adding back non-same-store sales, cost of sales, and expenses, which we define as non-same-store operating results in the calculation of gross profit, adjusted SG&A, and adjusted EBITDA. The financial results I review today will reflect our new methodology, and we have recast the prior year periods to conform to this new presentation. Fourth quarter 2022 gross profit increased 6.5% to $39.3 million, resulting in a gross margin of 21.3%, an increase of 260 basis points from the fourth quarter of 2021, primarily as a result of favorable product mix and price. SG&A expenses for the fourth quarter of 2022 was $37.7 million compared to $41.5 million in the fourth quarter of 2021. Adjusted SG&A was $34.7 million for the fourth quarter of 2022 compared to $37.2 million in Q4 of 2021. As a percentage of net sales, adjusted SG&A was 20.5%, a decrease of 60 basis points compared to the prior year period. Our team has done an excellent job of implementing and achieving expense efficiencies through key initiatives. Q4 EBITDA was $9.9 million, an increase of approximately 105% compared to $4.8 million in Q4 2021. Under our new methodology, adjusted EBITDA for the fourth quarter of 2022 was $12.9 million, an increase of 42%. The new methodology for adjusted EBITDA does not give effect to non-same store operating results of $2.8 million loss in Q4 2022, and $6.2 million loss for the fourth quarter of 2021. Adjusted EBITDA margin increased 240 basis points to 7% compared to 4.6% in the prior year period. Turning to our balance sheet liquidity for the year ended December 31st, 2022, the company generated $48 million of operating cash flow and ended the year with total cash and cash equivalents of $101.3 million. 2022 was the strongest cash generation year in the history of the company, with record free cash flow of $36.1 million within our expectations for free cash flow of $30 million-$40 million. We expect a similar level of cash flow generation in 2023, which reflects cash interest costs increasing by approximately $6 million. Excluding increased cash of $21.8 million from improved profitability, working capital is relatively flat, up $1.9 million over prior year. Inventory was unusually low in 2021. 2022 inventory is more in line with targeted weeks on hand. The increase in inventory was funded through increased AP. Our working capital needs are primarily to fund inventory and accounts receivable, both of which can fluctuate based on the seasonality of our business, retailer demand, and the timing of new product launches. Our total debt was $452.9 million as of December 31st, 2022 versus $459.3 million at the end of 2021. In addition to our cash on hand, the company's revolving credit limit is undrawn and has $125 million of availability, together representing total liquidity, which we define as cash on hand Plus availability of $226.3 million as of December 31st, 2022. While we have no intention of additional borrowing, we would note that our liquidity is ample and our credit facilities are flexible. Our net leverage as calculated under terms of our credit facilities as of December 31st, 2022 was 3.7 x. It is important to note that our leverage ratio and covenants as calculated under our credit agreements adjust for the impact of non-same store sale operating results. We will continue to provide the leverage calculations under the lender-defined EBITDA as we report going forward, given that it is an important measure of our ability to service our debt. We expect to continue to reduce our leverage over the next few years and expect leverage to be lower at the end of 2023 compared to the end of 2022. Subsequent to the end of the year on January 13th, 2023, the company acquired Rocco & Roxie, as Cord discussed, for $26.5 million in cash. We're excited about this complementary margin accretive asset as we look to introduce additional SKUs and significantly expand distribution in 2023 and beyond. We continue to believe our consistent growth, contribution from the Product segment, and improvement in the Services segment positions the company to drive free cash flow and build cash in the quarters ahead, as well as opportunistically pay down our debt. Turning to our guidance. For 2023, we expect net sales of $970 million - $1.03 billion. This represents an increase of approximately 9% compared to 2022, based on the midpoint of the guidance. Seasonality varies by year based on product launches, retail plans, and a number of other factors. In 2023, we expect approximately 1% or a $10 million shift in net sales from the first half of the year to the back half of the year as compared to 2022. We expect adjusted EBITDA of $86 million-$92 million, an increase of approximately 15% compared to 2022, based on the midpoint of the guidance using the company's new methodology. For the first quarter of 2023, we expect net sales of $270 million-$290 million, an increase of approximately 2% compared to the prior year period, based on the midpoint of the guidance. Note, as we disclosed last year, in Q1 of 2022, we had approximately $5 million of sales pulled forward into Q1 from the second quarter of 2022 to support fill orders for the start of the flea and tick season. Our customers have taken a more conservative approach to the start of the flea and tick season and have reduced fill orders as compared to Q1 last year by approximately $7 million. Accounting for these two items, our net sales growth would be closer to approximately 6% for the first quarter of 2023. For the first quarter of 2023, we expect Adjusted EBITDA of $27 million-$29 million, an increase of approximately 15% compared to the prior year period, based on the midpoint of the guidance using the company's new methodology. We are opportunistic about our opportunities for growth and success in 2023. We are pleased to have achieved results in line with our stated outlook for 2022. We remain focused on delivering value for all our stakeholders as we execute on our mission of smarter, convenient, and affordable options for pet parents. That concludes my financial review. With that overview, Cord, Michael, and I are available for your questions. Operator. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Bill Chappell with Truist Securities. Please go ahead. Thanks. Good afternoon. Hey, good afternoon, Bill. Just wanted a quick one on Rocco & Roxie. I assume that $29 million at least is in your guidance for this year in revenue and maybe what the expectations of revenue to grow this. I mean, I would assume it's higher, you're gonna be able to move into channels pretty quickly. Any idea of what that's into this year's numbers? Also it looks like that's predominantly, at least from online, more in the cleaning area. I know they have a kind of a wide range. Is this part of a move to, you know, to cleaning to other kind of non-pet med areas or do you plan to leverage their pet med or and treats offering more? You know, help me understand the goals going forward there too. Bill, thanks for the question. I think, you know, first of all, the $29 million they had last year, they've been chasing a number of non-strategic categories and business that was not very profitable or core to any of us. That business we removed in our go-forward plans. The base that we rolled forward was roughly about $4 million less than that. We've modeled it in 2023 to be $30 million in sales and be roughly $3 million of EBITDA contribution to our guidance, they are in our guidance numbers. The company's had a ton of success in stain and odor. Stain and odor is in the same area of responsibility for all of the buyers and buying groups that we interact with at every retail group. It ends up being part of all those things that you're making decisions around how you take care of your pets needs besides, you know, food and treats and some of those. Although it isn't hardcore healthcare, it ends up being a big part of the decision on how you take care of those type of things. There is a big opportunity for us to take the brand and go wider into that space. There's also a big opportunity for us to just look at how the brand has grown and how the consumer is connected to it to move it other directions and do some testing. The company currently has predominantly all of its sales online, did not have experience with brick-and-mortar retail. We will not see a significant increase in points of distribution until 2024 due to the timing of the deal and line review season. We have met with a number of our retail partners, showed them the ranking on the SKU, they know it, and how the brand performs, and feel very good that expanding distribution significantly, being able to add new items into the SKU, and then just having more sophistication on our team to even drive the base business acceleration is going to be a deal that's going to feel and operate very similar to CAPSTAR. Where we bought it for a great multiple, but with, you know, 18 months of execution, the multiple is almost cut in half. We're very excited about the deal. We feel good about it. Gives us more space to work and another brand that we're excited to build. Got it. Then just follow up. As you look into the upcoming flea and tick season, I know with weather you have I guess, favorable comparisons, but how are the retailers looking at it? Are they stocking early? Are they stocking more? You know, are they primed with the bigger pet population to really push it? Or is this, you know... How are you feel like it's staged, you know, even though the season hasn't really started in earnest, for another couple months? I think, you know, kind of we say it in the commentary. We've seen fill orders this year about $7 million less than normal. That's not a huge percentage in the scope of what those fill orders are. In general, retailers are getting ready for the season from a normal perspective, but definitely being a little more conservative than last year. Philosophically, I can tell you our approach has been to have some minor healing back into the category, still be conservative, and be ready for the season, and our guidance kind of contemplates all that. We're not automatically assuming all the weather-related lost sales from 2022 are just gonna show up and be 100%. That's all left side if it happens. Remind you that in Q4, we saw still the high-end premium flea and tick still see some pressure, and it was probably almost $12 million of volume in the fourth quarter just at that high end. Whether you follow Elanco that reported the softness in sales in their high end or what we've been, you know, showing through the data, the high end's been pressured and we've assumed it's going to continue to be pressured, and that's also all contemplated in our current guidance. Got it. Just to make sure I understand, $7 million lower in inventory, you think that's more about the category or more about retailers losing all their inventory across categories,, versus a year ago or two years ago? Well, I think in reality, Bill, 'cause you know, sales is a component of weeks of supply. Typically, when they do their fill orders, they'll have, based on current sell rate, 18 weeks, 19 weeks of supply. The minute the season kicks off, they're trying to maintain eight weeks of supply, but can run the category very easily with six weeks. We've seen a couple of retailers take about one week of supply out of their assumptions, which represents a number, everybody else acting normal. I just think you're gonna see a few people be conservative, but everyone is well-positioned to keep the weeks of supply at a rate that they won't be out of stocks, and we'll be able to maximize the sales for the year. Got it. Thanks so much. Thanks, Bill. Our next question comes from Corey Grady with Jefferies. Please go ahead. Hi. Thanks for taking my question. I wanted to follow up on your comment on seasonality this year. As we think about, you know, your product category performance, can you remind us what typical seasonality should look like in your product business and how you expect this year to vary with, you know, the acquisition and then the new product launches? Thanks. Yeah. When you look at the first half of the year, this past year, our sales were 57% of total sales, 43% in the back half. This year, based on our current plans and modeling and what we think is reasonably conservative seasonality, we think that moves to 56%, 44%. You have obviously our guidance for Q1, take the midpoint, you apply those percentages, you can see very quickly that 1% shift in the midpoint of our guidance is about $10 million of volume we think moves the back half tied to really our non-seasonal business and through the acquisition, leveling some of that out. As you know, Corey, until the season starts, we won't be able to see exactly what our assumptions are. We will be giving you updates, you know, obviously every time we speak with you, what's different or where that's at. You know, 12 years of being in the category, operating PetIQ, we usually get a pretty consistent run rate out of our seasonality and are consistent with the numbers. That's what's assumed in the model today based on our best guess. It's educated, lots of data-driven decision-making, and then we'll let you know if there's things that change relative to actual market conditions once things kick off. Got it. That's helpful. Just as a follow-up, I know you've got some new product launches this year. You got the acquisition, you're expanding distribution, so kind of lots of moving pieces going on. Can Can you just help us understand the launches you have coming this year, what you're thinking in terms of revenue contribution and how we should think about the marketing spend, advertising and marketing spend to support those. Thanks. Yeah. Hey, Michael, do you wanna take a shot at that one? Yeah. Hey, Corey, it's Michael. In terms of 2023 new item launches, really the most meaningful is actually year two of NextStar. That's a brand that we, if you recall, we mentioned we're launching later last year than we would have liked, which means we missed some customers' planogram, revision cadence that we are now able to get into for 2023, most specifically at specialty. In terms of new item launches, I would say year two of NextStar is actually our most meaningful piece of innovation, continuing to expand it into more channels. In terms of A&P and marketing support, we've got planned consistent support compared to 2022. You know, NextStar last year was a brand that we made a meaningful investment in. We are maintaining a meaningful investment in that brand in year two for a couple reasons. One, to not have an approach of launch and leave and stop support after year one, which is tempting, but not the right thing to do to build the long-term sustainable health of that brand and to ensure that those new points of distribution, again, most meaningfully in pet specialty, have strong support year one to ensure long-term distribution. Thank you. Our next question comes from Rupesh Parikh with Oppenheimer. Please go ahead. Good afternoon, and thanks for taking my question. I wanna dig deeper into your service business. Growth slowed in the quarter, I think to about 4% growth year-over-year. Curious if that was in line with your expectations. Then, you know, as we look forward to 2023, I just wanted to get a sense of how you think about the business for 2023. Yeah. Thanks, Rupesh. I'll take a quick shot at a couple things, and John Pearson's also with us as well, if I miss something, he can add to it. You know, full year 2022, we ran about a 13% increase year-over-year. If you think about when John Pearson started and immediately dug into fixing and optimizing and dealing with things in the business, fourth quarter is where we really saw a full quarter of that work. Some of that optimization was being lapped, and that's why it was a little more muted as far as the top line growth rate. This year in 2023, based on incremental plans we're doing, what we're seeing out of the business, we think it'll grow in the low double digits as well, similar to 2022, maybe a little bit less than 2022, but close. Fourth quarter is our slowest season. People tend to turn to the holidays. We see the least number of pets for the year during that time period as well, which is also part of what affects, you know, that growth rate year-over-year. Does that help you or? Yeah, that's great. No, that's great. That's great color. Just on the capital allocation front, you guys do have a, you know, healthier balance sheet, strong cash position right now. Just wanna get a sense of priors from here, whether it's debt pay down, share buybacks, more M&A. If you can just remind us how you guys are thinking about capital allocation going forward. Go ahead, Zvi. Look, we don't really think of capital allocation much differently than we did. We delevered the balance sheet by about almost a half a turn this year. We would point out that the acquisition of R&R probably cost us about 0.2x of a turn. Our long-term target remains, you know, to be in the 2.5x - 3x range this year. You know, if we do nothing more, we will probably deleverage again about almost a half a turn. We do have the ability, we think, to do acquisitions. We will continue to be extremely prudent and selective about deals that fit these financial metrics and strategic metrics like the ones before I joined here, CAPSTAR and so forth. We feel it's equally excited about R&R. First and foremost, reinvest in the business, whether that means opening stores and wellness centers and so forth. That's first and foremost the priority. You saw that with... as well with our advertising lean in last year. We are leaning in this year as opposed to maximizing EBITDA. Secondly, paying down debt, then thirdly, we would tell you, acquisitions. Great. Maybe one final housekeeping question. I may have missed this earlier, but did you guys provide guidance for interest expense or CapEx for the upcoming year? Yeah, I think we did, but if not, I'll provide it here. Our cash interest will probably be up around $6 million, I mean, assuming, you know, kind of what we're seeing right now with the Federal Reserve. Our CapEx will be more or less in line with last year. Great. Thank you. Thanks, Rupesh. The next question comes from Jon Andersen with William Blair. Please go ahead. Hey, good afternoon, everybody. I wanted to ask just on the product business, the mix shift towards more of your own manufactured brands is obviously important for a variety of reasons. It looks like you're expecting that shift to continue in 2023, even maybe accelerate a bit. Could you talk about what, you know, specific initiatives are allowing you to, you know, push that part of the business higher? You know, if you do get to 32% in 2023, what are you kind of shooting for longer term? Could this be 40% of the product portfolio over time? Just trying to get a sense of how you're thinking about that longer term as well. Mike, why don't you take that one? Hey, Jon. Thanks for the question. I think in the near term, there's a couple of dynamics in play. One is, as we think about the flea and tick category and how it's behaving, how the consumer is voting in terms of the price tiers, we are seeing continued pressure on the top end of the spectrum, which pressures our distribution business. We're seeing real health and traction with mid-tier and value, which is where our manufactured portfolio plays. As that dynamic plays out, there's naturally a bit of a swing from distributed to manufactured. We're also candidly seeing a bit of a slowing in the RX conversion from the vet into the online e-commerce channel, where for the last three years that's been growing greater than 20%. We still think it's going to be healthy at +5% - 10% growth. That has been, one of the, you know, offsetting pressures in the mix is as that RX business has been, a fast-growing segment. It's pressured our ability to grow our manufactured business faster than the distributed business. This is the year where I think that dynamic flattens and plateaus. We've got a lot of categories that we don't talk as much about. Our pet supplements, our dental treats and dog treats, cat treats lines that are all growing, well faster than the rest of our portfolio, many of them greater than 15%, some greater than 20%. As that continues to play out in 2023, that will begin to chip away at that metric as well. When you layer on, Rocco & Roxie, that's obviously, roughly 3% of our mix that will come, layered on, to the numbers that we have been targeting and previously discussed. Thanks. I think to answer your question longer term, clearly, we, you know, are on a mission to continue to build out the health of our manufactured brands portfolio, whether that be through existing brands, whether that be through continued M&A targets and potential to build out the portfolio. We, we don't have a stated objective by 2025, 2027, we wanna be at specific percent mixes, but we do have an objective over time to continue to see that part of our business outpace the growth of our distribution business. Great. Thanks, Michael. That's really helpful. One on the services side, it was interesting to hear the prepared comments on both the vet hires in the fourth quarter and the improvements in cancellation rates on the community clinics. You know, is this something that you think was kind of a one-off in the fourth quarter? Is it indicative of a trend that will continue? What is this kind of macro-related, you know, that's driving this? Are there specific things that you're doing that you think are having a company-specific impact? Just trying to get a sense for that. How many wellness centers would you anticipate opening in 2023 based on kind of the current hiring conditions? Thanks. I think, not exactly what you asked there, Jon, but you know, typically, as you know, in our community clinic business, we have a, you know, bid portal that veterinarians that want to work extra hours on a 1099 basis bid on those shifts. We saw the lowest count we've ever seen bidding during COVID. Pre-COVID, we were well above 3,000 veterinarians. Just coming out of fourth quarter, in the first quarter, we're back to those kind of pre-COVID numbers that are in the system now, bidding on shifts. That just returns as veterinarians lives balance in a place where they're ready to get extra money and work, and there's not much we can do. We continually market to the pool that's always been there. They've kind of shown up this past quarter in a way that we feel good about the community clinic pool being the healthiest it's ever been. We'll see the quantity of shifts they're willing to work. That's a variable that's not captured in that. Definitely we've seen cancellations because of that labor not being available drop significantly where we had single-digit cancellations for the first time since the onset of COVID. That's a big, big margin driver. It's a big opportunity for the company. On the recruiting side, getting to 17 vets, again, we've had a lot of learnings along the way. This quarter, those learnings were well-received in how we've changed some of our communication. We've hired a good number of vets this quarter. We hope to hire a bunch more. Right now, until we can see something different and update you differently, we're assuming 23 is going to look like 22 as it relates to new openings. That's the general, you know, assumption in the model. If we're able to do better than that, then we'll be telling you that along the way. That right now is what's currently in the guidance. Great. Thanks, Cord. Thank you. Thanks, Jon. The next question comes from Elliot Wilbur with Raymond James. Please go ahead. Thanks. Good afternoon. Question for Cord. Just want to go back to some of your earlier commentary around parasitic market dynamics. Not sure if you have the granularity to sort of, you know, tease out what's driving the pressure, whether it's just continued negative impact from conversion to the triple combination products or it's equal to or outweighed even by sort of the, you know, consumer trade-down e-effect. You know, any incremental thoughts there would be helpful. How are you thinking about the likely introduction of NexGard Plus in terms of, you know, impacting the OTC channel further than what we've seen with Trio? That's, I guess, sort of a dual question since would expect that to be also part of your distributed product portfolio. Just how are you thinking about the impact of that product on your business, both in terms of the category and then your distribution business specifically? Yeah. I'll take a shot at that. Michael may add some other commentary at the end if I miss something. We've been through a number of launches of new items like that, Elliot, and when we've had those items in our portfolio, any negative cannibalization that took place was more than offset by the increased volume that took place. We will be the exclusive distributor for NexGard to the retail channel, as we are for all the other BI items. NexGard, prior to the Trio, had the number one market share, was the most notable brand in chew, hopefully in tick. HEARTGARD was the number one brand there as well. We know they know how to market and sell, so we're looking at NexGard Plus coming out being a net positive to the company. We do know they're still going through the process of now talking about it from a soft launch perspective. It was at all the conferences here early in Q1 being talked about. We also know there's still work with the FDA and getting some things done. Our current guidance does not anticipate any increase in volume from the launch, but more that any cannibalization will be offset and be flat on the other way. Just with fill and otherwise, it should be a net positive to us. Any of the other launches always been positive in the past. From the OTC, you know, conversation, you know, obviously, we've talked before about this, and we've looked at the leakage tree on the flea and tick category and what's going to Trio, what's leaving, going back to bed, what's doing this. We don't see a significant amount of volume coming from retail back to Trio from our leakage trees and watching those, but we do see some coming, so it's not nothing, but it's all at that very high end. Additionally, like we said, we've seen trade down where our brands that have normally performed and had unit volume increases that those trade downs are leading to us picking up a few dollars here and there from a volume perspective. You know, our assumptions going into this next year, where we're still being conservative. We know there's category pressure, and we're continuing to roll forward what the current consumption rates are across the various brands to make sure that we're anticipating those things properly. We did project in some slight healing from the, you know, the big drops that took place because you had so much at the same time with inflation shock and weather that we have some slight healing but not, you know, significantly assuming all weather goes away and it's in a good place. Michael Smith, did I miss anything else you want to share? Was that ample? No, no. That pretty much covers it, Cord. I would just add, you know, as we think about OTC flea and tick, the court's comment about not a meaningful amount of units leaving the channel and going back to the vet, we are seeing a lot of units, you know, stay within the category but move down in price tier. That obviously puts some pressure on the category growth rates as well. Yeah. In terms of NexGard Plus, you know, definitely still waiting for clear guidance from our partners on exactly that timeline and rollout strategy and plan. To Cord's point, we do see it largely, I'll call it a wash, meaning it's going to source its volume from NexGard and HEARTGARD customers, where Trio came in and sourced differently because it didn't have an existing base of what I call similar molecules and offerings in the marketplace. We do believe that NexGard Plus will primarily cannibalize NexGard and HEARTGARD, and we've got that model contemplated in the year that we've built out. Okay. Thanks. Cord, voice issues aside, clearly, a more positive tone on the services business is coming through loud and clear. Maybe just a couple additional questions there. Maybe you could just highlight some of the KPIs in the mobile business in terms of, you know, what you're seeing in terms of growth in the pets treated and average ticket price and the like. I'm curious, you know, you continue to see sort of this trade-down effect as consumers start to tighten the pocketbooks a little bit in terms of at least, you know, retail takeaway. Not sure, you know, how evident that is necessarily on the services side, but, you know, certainly seeing higher ticket prices negatively impact clinic visit trends. I'm wondering if you're, you know, you would suggest that you're seeing sort of an increase in volume specifically related to the higher rates of inflation that you're seeing at the end clinics that's, you know, a positive more of a positive tailwind at the end of the year than maybe we saw at the beginning. Then just, you know, last question in terms of performance of new wellness centers. Maybe just comment on how new wellness centers opened this year have performed relative to historical trends. Thanks? Thanks, Elliot. I think first and foremost, as we've talked about this journey we've been on since John Pearson joined the business, you know, we optimized the business first. We realigned the P&L to current cost structures and current market trends, not waiting for the market to return to 2019. We reworked the way we communicate with our customers and our pet parents to attract customers. We've had a lot of healing in the base business, number one. Number two, since that healing, our consumption and growth rates and customer acquisition rates right now are running significantly above what the vet industry is running. Your comment about value being meaningful, yeah, I mean, we're seeing almost, you know, a double the rates. Where they're running flat negative numbers, you know, we're running significantly positive, and we're well above their performance, which says there's definitely still a need and a model there that makes a lot of sense. We're, you know, very excited about. Model has always been committed to that because the exit interviews of our customers are always super positive relative to our model. The, you know, next phase of this business, we talked about going in and looking at other ways to have an offering that made sense to the market. We have opened up a couple test pilot stores where we've added a significant number of additional services to our base wellness centers. Those base services are things that do not require vet labor, but are needed for your pet's healthcare on a monthly basis, so increases visits significantly. Those tests in the first two locations are ahead of our expectations. We will open a number of incremental locations to get multiple markets testing the same concept. If that concept continues to perform as we are currently optimistic it will, then it'll be a big change in the model and significant improvement in the overall thoughts on how we operate. Just the fact that we can have days we run without a vet, days with a vet, starts to balance a really solid model that leverages both the strength of our community clinic business, wellness center business, and all the things in between. I think more to coming out as we get more data, but John's done an amazing job. He's now in the weeds on just the base wellness center business and making significant improvements there. Things are going the right direction. I would say volumes are kind of on track with where we'd expect them to be in the model, both new and existing, which they need to be better than that, and so we're working hard to do that there, what we've done other places. We're very encouraged what we're seeing with the consumer, what's happening. We always talk to KPIs are dollars per pet, pets per clinic, total revenue per clinic. All those KPIs are the best they've been in a very, very, very long time, which is encouraging. You know, so just getting back to where we're recovering the margin that we weren't able to harvest during COVID is an exciting time, and that's encouraging. I think we have more encouraging days ahead of us as we resolve some other things that are in front of us and able to scale those things as part of the overall model and more to come. Again, the base driver of this business is still us growing our product business, that product business delivering the margin, that product business delivering the cash it's delivering, and the service organization now kind of carrying its own weight, and now in the future, starting to add similar contribution and get larger. Our next question comes from Jon Lawrence with Benchmark. Please go ahead. Thanks, guys. Cord, would you talk a little bit about Rocco and Roxie? And when you look at the SKU base, I know you're gonna cut some things out. What percentage of the SKU base that they have now probably goes away, 10%, 20%? Yeah, it's more like 10%, Jon. The reality of it is, like anything, they are right now, you know, doing almost all of their volume with a very small number of customers with a very small number of SKUs. They had a very unique technology, super premium in the stain and odor. It's quickly become a top 10 pet item, not just stain and odor, a top 10 pet item at one of the largest online, you know, pet product sellers in the e-com space. That, that tells you how the brand connects and the quality of what they're building and what they're doing. We see a significant amount of upside to add the brand. I think it's similar to a CAPSTAR, where we paid a reasonable multiple to buy the business. When you look at, you know, on a second-year run rate and contribution, we can see that multiple go down significantly to where we just have a lot of confidence in our ability to read the market, both for distributions and items. We've now done it multiple times with our Perrigo acquisition, our CAPSTAR acquisition. This has very similar attributes to that, so this is the ones we get excited about. Right. CAPSTAR, fully integrated 9- 12 months? You know, The thing about this business is it's a, you know, they don't need no manufacturing. They're using co-man manufacturing. Only had about 12 employees. We're going through the process of deciding if we need all 12 or not, but they're all good people, so likely. We won't need to keep any of their buildings or facilities. They'll move right into one of our facilities, and it becomes more like a brand acquisition than a true company acquisition, Jon. We plan to be integrated from a pure operating standpoint with the same kind of supply chain, in place in the first 90 days. The next six months will be where we significantly improve that. Got it. Last question from me is, your retail partners that, are either waiting for those conversions or, new builds on the services side, I assume they're just, you know, still chomping at the bit to get you in line there. I assume that's correct. Yeah, there's no change in the people's desire and partnership to want more. Obviously, we would love to give them everything they want. We have not dramatically improved that for them, but we are making as much progress as we can. We have good relations with all of them, and we're just, you know, continuing to stay very connected and communicate the best we can. That's where we are right now. Great. Thanks so much. Good luck. Thank you. This concludes our question and answer session. I would like to turn the call back over to management for any closing remarks. I just wanna thank everybody for joining us today. Obviously, we felt extremely good about delivering both in our guidance for both our sales and our adjusted EBITDA for full year 2022. Feel great about our guidance going forward into 2023 with our implied growth rates and performance there and great visibility and being able to be at a place where we can have that information going into the year versus being surprised at what's happening in the market. Thanks to our employees, our team members and everyone that helped us do those things and deliver the results. We'll look forward to our quarterly updates as we continue to deliver against our guidance and our plans and look forward to interacting with all of you. Thank you, everybody. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.