Importantly, our performance for the full-year has strengthened our balance sheet and brought strong operating cash flow performance. This combined with the benefits from our cash management initiatives meant that earlier this month we paid down an additional $35 million of principal on our debt, as well as taking further actions to manage our floating rate exposure and we're committed to pay down additional debt, while continue to invest to enable our long-term growth strategy. Brian will elaborate shortly. At our inaugural Investor Day last year, we laid out three core growth pillars: first, the rapid scaling of services; second, furthering the differentiation of our merchandise; and last, leveraging data and membership to build loyalty and share of wallet.

Let me share our progress and results across those pillars. Services delivered a strong 14% comp growth in the quarter, up 36% on a two-year basis. In veterinary services, we are now at scale with a veterinary presence in 90% of our pet care centers. Petco's hospitals and clinics saw nearly 1.9 pets in 2022, positioning us as one of the leading providers of veterinary services in the United States. Record veterinarian hires, improvements in ease of online booking and innovation in medical technology significantly boosted transaction volume, bucking industry trends with double-digit sales growth for the full-year. We added over 1,100 veterinarians to our ecosystem in 2022, representing a 40% increase, compared to year ago. We also added 50 new full service vet hospitals this year, in line with expectations.

We now have a total of 247 hospitals across the country, a significant milestone having come from just 10 at the beginning of 2018 and cementing our position today in the top 10 from a hospital unit standpoint. Petco continues to provide a single trusted ecosystem for pet wellness that remains unique in the industry. Pet Care Centers of vet hospitals continue to see a mid-single-digit center store lift are growing faster and have higher profit dollars, compared to locations without hospitals. Vet customers are also demonstrating a 2.3 times higher lifetime value than non-vet customers. Last year, we ran over 58,000 vet co-clinics across 46 states, up strong-double-digits, providing convenient, affordable and critical preventative medicine. With great care at a great price, our vet clinic business is the right offering at the right time for many of today's pet parents.

Clearly, Petco has built a unique and profitable services offering with veterinary services at its heart, but it's more than that. Under the exceptional leadership of our Chief Veterinarian Dr. Miller and our team, we are redefining what a veterinary network looks like through powerful industry partnerships, innovative trading programs, and technological advances in medicine, including AI radiology, diagnostics, and multi-species ultrasound. The results -- our vet business is an incredible growth driver and our model provides a compelling home for veterinary professionals, while improving and saving lives of even more pets. Turning to our differentiated merchandise, 2022 was another strong year. The addition of exclusive and formally independent only store brands such as Backcountry and Stella & Chewy's, have been powerful in driving our premium mix and accessing new customers.

Meanwhile, our mix of popular own brand supplies and consumables including Reddy and WholeHearted, which both grew in revenue and penetration over the year, continue to meet the core humanization trend, while also catering to a variety of wallet sizes. Taken as a whole, our differentiated assortment is driving retention with our health focused customers offering products unavailable in mass or many online channels and reducing our competitive promotional exposure. Total merchandise sales were up both in the quarter and for the full-year. Highlights include double-digit growth in consumables, driven particularly by our own brand WholeHearted. Continued year-over-year growth in both revenue and customers and Fresh Frozen and double-digit growth in RX making progress in this $12 billion addressable market.

And while our more discretionary supplies in companion animal categories saw a decline year-over-year. Our fourth quarter saw an over 100 basis point improvement in the year-over-year growth rate versus Q3. In the high value Fresh Frozen category, we maintained our structure advantage versus online only players. With over 90% of e-com customers choosing same day delivery of BOPUS when available, we're able to leverage our pet care centers as micro distribution centers, getting product to customers faster and in many instances with lower fulfillment costs. And today we announced an absolute breakthrough in the industry first an exclusive partnership with Freshpet, the number one brand in Fresh Frozen pet food. This makes Petco the first national omnichannel pet retailer to offer a customized fresh pet food subscription delivered direct to customers' doors.

With the Fresh Frozen pet category expected to reach $6 billion within the next four years, and the direct-to-consumer pet segment growing faster than traditional pet e-commerce. These custom meals further enhance Petco's ability to lead the way in the megatrends of personalization and humanization. The fact that the leader in Fresh Frozen chose to exclusively partner with Petco is a validation of the power and advantages of our unique omnichannel and micro distribution center capabilities. We're delighted to be bringing this industry first offering to market. But it's not just our merchandise it differentiates us, it's also our omnichannel delivery capabilities. Our digital channels continue to gain momentum. App and website sales delivered double-digit growth both in the quarter and for the full-year, translating to 32% growth on a two-year stack and an incredible 138% on a three-year stack for the full-year.

And this year, we hit a milestone surpassing $1 billion in recurring customer revenue, driven by repeat delivery, vital care and insurance. Securing revenues that are both predictable and retentive. In our pet care centers, we achieved 11 consecutive quarters of brick and mortar comp growth. And as promised, every non-trainee partner at Petco is now paid a base wage of at least $15 an hour. PCC partner application retention rates continue to be strong and are up year-over-year as we provide an engaging and rewarding environment to work and flourish. Strengthening our business in the short and long-term. Internationally, our number one Mexico business continued to go from strength-to-strength delivering double-digit revenue growth year-over-year.

We added 12 new locations this year, furthering our penetration in this rapidly growing market and bringing us to a total of 120 locations. Our world pilot continued to scale profitably, making progress in capturing the $7 billion addressable market. As the organization increases and pet spend continues to grow in rural markets, this natural extension of our core offering provides pet products and services that are unique and highly desired by passionate pet parents. As a result, in aggregate, the pilot is performing above model and trending to be cash flow positive within the first year. In addition, our lowest pilot in Canadian Tire partnership continue to perform extremely well, both with significant runway for growth. Finally, turning to customer loyalty insurer wallet.

Photo by National Cancer Institute on Unsplash

Our insights driven approach to data, marketing and customer experience enhancements added 1 million net new customers for the full-year. Including over 70,000 ads in the quarter, our total active customer base now stands at over 25 million. In January, we unified all memberships under the Vital Care program. Members of our Pals program were transitioned to Vital Care Corp. Members of our existing paid Vital Care program were transitioned to Vital Care Premier. Dramatically simplifying loyalty of Petco and enabling a clear trade up path is already paying dividends with increased upgrades from free to paid. In February, we had a major milestone, reaching $0.5 million paid active Vital Care Premier plans. In addition to providing tailored benefits, savings and advice pet parents, our Vital Care Program drives loyalty and brings them further into our ecosystem.

Premier members have a 3.6 times higher lifetime value than non-members. They visit more and we see a lift in spend across all categories translating into higher Petco margin dollars versus non-members with recently acquired members spending more than prior cohorts. Finally, before I close, let me turn to Petco Love. In the fourth quarter alone, together we saved over 97,000 pet lives and have now reunited over 17,000 pets to-date through Petco Love Lost. And in partnership with Merck, Petco Love delivered 172,000 free vaccines in the quarter, making great progress against our second million free vaccine commitment saving pets from preventable deadly diseases. All incredible examples of how we deliver against our mission of purpose-driven performance.

And we're grateful to Blue Buffalo for their financial support to the Yummy Memorial Cancer Fund, a program geared to my heart, providing financial assistance to our Petco partners for pet cancer treatment. Personally, I'd also like to thank the teams at Petco Love and priceless pets rescue in Southern California for helping me find the newest member of the Coghlan family, our sweet new chocolate lab, Yogi, which having a father who is lifelong net span required some research to confirm Yogi Berra spent almost 10-years with the meds, a few days as a player and the remainder as a coach. Yogi is fitting into his new role as Chief Dog Officer well, pony his skills with Dog Trainer Zooey at our Delmar location and keeping up to-date are all as vaccinations with Dr. Rice at our Vetco Hospital in Encinitas.

To conclude, I'm energized about the strength of the pet category and our differentiated strategy. To be sure, there is still significant progress to be made, but we're executing well in the current environment and our strategy for long-term growth is unique and working. The pet category remains vibrant and we continue to have one of the best teams in retail whose dedication is delivering day in and day out. With that, let me hand it over to Brian.

Brian LaRose: Thanks Ron and good morning, everyone. Building on Ron's remarks, we delivered against our strategic objectives throughout a challenging macroeconomic background and I too want to extend my thanks to the 1,000s of Petco partners across our pet care centers, distribution centers and support centers for their dedication to delivering the very best for pets. Looking at the quarter, net revenue was $1.6 billion, an increase of 4% year-over-year. Total revenue of $6 billion for the full-year was also up 4% year-over-year and our cash flow came in significantly above our expectations, allowing us to take further actions to reduce principal on our debt, which I'll elaborate on more. In the fourth quarter, comparable sales driven by sustained strength and average basket trends grew 5% year-over-year and 19% on a two-year stack.

For the full-year, comparable sales also grew 5% and 24% on a two-year stack. For the quarter, total services grew 14% year-over-year translating to 15% for the full-year, driven by strength in vet and grooming and further enhancements in our booking systems. In merchandise, strength and consumables, which grew 12% in the quarter year-over-year and 13% for the full-year, continued to offset the anticipated transitory impact of discretionary purchasing in supplies and companion animals, which were down 9% for the full-year. And as Ron said, we did see a 100 basis point improvement in Q4. Our digital business also showed strength with double-digit sales growth in both the fourth quarter and the full-year and expanded gross margin in the fourth quarter, buoyed by strength in our digital pharmacy and repeat customers and the continued growth of our rapidly scaling ad network.

Moving down the P&L, gross profit was down 1% in the fourth quarter at $627 million and flat for the full-year at $2.4 billion. Q4 gross margin of 39.8% was 220 basis points year-over-year and gross margin for the full-year of 40.2% was down 160 basis points. The decline for both the fourth quarter and the full-year was driven primarily by the mix impact of consumable strength and transitory supplies pressure combined with elevated supply chain and associated capitalized rate costs, which as for many, brought headwinds on a year-over-year basis. Our team has worked tirelessly to improve operating leverage by focusing on strategic cost initiatives and have picked up momentum throughout the year. As a result, I'm pleased to report that in the fourth quarter, SG&A as a percentage of revenue improved from 36.5% to 34.8% year-over-year, down 170 basis points.

For the full-year, SG&A as a percentage of revenue was 36.5%, down 70 basis points. On an absolute basis, fourth quarter SG&A expense was $550 million, down $3 million from prior year, inclusive of continued investment in our pet care center partners. Demonstrating our cost discipline in a balanced approach to managing the short-term, while making strategic long-term investments. For the full-year, SG&A was $2.2 billion, up 2% from 2021. Q4 adjusted EBITDA was $170 million, down 1% from prior year with an adjusted EBITDA margin rate of 10.8%, compared to 11.4% in the prior year. For the full-year, adjusted EBITDA of $582 million, was down 1.5% with an adjusted EBITDA margin rate of 9.6%, compared to 10.2% in the prior year. Q4 adjusted EPS was $0.23, a decrease of $0.05 from the prior year based on $266 million weighted average fully diluted shares and a normalized effective tax rate of 26%.

Full-year adjusted EPS was $0.75, a decrease of $0.16 from the prior year. I now want to take a moment to provide an update on changes to our go forward adjusted EBITDA, adjusted net income, and adjusted EPS definitions. To-date, we've been reporting these metrics consistent with the approach taken by other newly public companies. Following a period of evaluation and review over the last few months, feedback from investors and to remain in line with evolving best practices, we are updating the treatment of certain adjustments on a prospective basis. While our fourth quarter adjusted non-GAAP results reflect our prior definitions, future results will be based on these updated definitions. To be clear, none of these changes will have an impact on Petco's cash flow or affect the company's operations and strategic priorities.

We will no longer include store pre-opening, store closing and non-cash occupancy expenses in our add backs and will limit non-recurring costs to restructuring charges one-time material legal reserves and significant one-time transaction related charges. We believe these updated definitions will create more clarity and insight into Petco operating results. To assist investors in this transition, we've provided reconciliations between our prior and new non-GAAP definitions. Moving beyond the P&L, our liquidity position remains strong. We ended the quarter with $646 million inclusive of $202 million cash and cash equivalents and $444 million of availability on our revolving credit facility. We've continued to make meaningful improvements in our cash flow performance with a 96% increase in Q4 operating cash flow over the prior year and free cash flow of $71 million, up $76 million over the prior year.

The way the team managed the inventory was a key contributor to our strong free cash flow. And outcome of our investments into strategic supply chain enhancements, as well as operational discipline. In-stocks were up tangibly year-over-year and we continue to work actively with our vendors to position us well while we navigate this environment. Last quarter, we said we expected to be free cash flow positive for the year, while still investing in pillars of future growth, including veterinary hospitals and cooling infrastructure to accelerate our Fresh Frozen business. With exceptional cash flow performance in the fourth quarter, free cash flow for the full-year was $68 million. We continue to see opportunities to further improve our working capital moving forward.

Given our strong cash position, as Ron noted, last week we paid down $35 million principal on our debt, $31 million more than the required quarterly payment, an indication of our strengthening balance sheet and commitment to reduce overall debt levels. Additionally, to take further actions to manage our interest rate exposure, we implemented callers on a portion of our floating rate debt. Combined with the caps we implemented last quarter, we have significantly mitigated our interest rate exposure. Now shifting to 2023, as we plan for the year, we remain confident in the strength of our unique health and wellness ecosystem that continues to set Petco apart and, in our ability, to deliver against our strategic priorities, including vet digital and owned and exclusive brand differentiation.

We fully expect the pet category to remain resilient with growth overall, as seen in past economic downturns with notable strength and consumables and services. While discretionary categories remain pressured and while we anticipate the macro environment to remain fluid, we expect our supplies and companion animal businesses to work their way toward normalization. In the meantime, we are focused on programmatic cost initiatives to mitigate against mix pressure to manage our business in the short-term, while reinvesting in the business to improve long-term profitability and create additional shareholder value. We're confident in our ability to continue to improve free cash flow in 2023, and to do so without sacrificing ongoing investment in our strategic long term growth initiatives.

Turning to guidance, I'd like to remind you that our outlook reflects our new updated non-GAAP definitions. Additionally fiscal 2023 will be a 53-week year for Petco, leading to an incremental week of operations relative to fiscal 2022. Our guidance reflects the extra week. In fiscal 2023, we expect revenue of $6.15 billion to $6.275 billion. Adjusted EBITDA of $520 million to $540 million to be roughly flat. Adjusted EPS of $0.40 to $0.48, including an incremental $0.12 to $0.15 and expected interest expense since fiscal 2023. Approximately $273 million of shares outstanding and an effective tax rate of 26% and $225 million to $250 million of capital expenditures. The expected reduction in capital spend in 2023 reflects the completion of one-time investments in high ROI initiatives such as freezer build outs for Fresh Frozen and the retirement of some technical debt in IT.

Importantly, we will continue to invest in our long-term growth drivers. Additionally, we are targeting principal debt payments of approximately $100 million as a commitment to further strengthening our balance sheet. Our guidance is based on the current economic outlook and represents a one-time forward-looking comment on our debt paydown in light of this unique environment. We expect to open 50 to 55 owned vet hospitals in 2023 and 10 to 15 rural locations, both of which are reflected in our guidance. When thinking about our guidance, there are a few things to keep in mind: in light of our expectations of the macro evolution and the transitory softness in the discretionary categories, we anticipate adjusted EBITDA to be down in the first-half with Q1 being a low watermark and flat to up in the second-half.

As we start to see normalization and discretionary trends, we expect improvement to the revenue and gross margin trajectory that we are currently anticipating for the year and correspondingly an enhanced EBITDA rate. We saw modest improvements in freight costs in the back half of 2022 and we expect to see further improvements to our freight costs in 2023 as the overhang on freight alleviates, which will be increasingly realized as we progress through the year. And finally, I'd like to reiterate our emphasis on investing for long-term growth and our continued execution against our working capital optimization provide us confidence to support our balance sheet, while also making high ROI capital investments. To conclude, we remain committed to delivering against our short, medium and long-term goals to provide the best and only full service health and wellness ecosystem for pets and to deliver sustainable profitable growth.

We remain focused on what's in our control and on our structural investments and services, differentiated merchandise and data and memberships continue to be the drivers for growth in a resilient category, while making us well positioned for consumers in any economic environment. Thank you for your time. And with that, we'd be happy to take your questions.

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