The Joint Corp.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Joint Corporation's second quarter 2020 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star, then 1 on your telephone keypad. As a reminder, this conference call is being recorded. If you require any further assistance, please press star and 0. At this time, I would like to turn the conference over to Ms. Mariah Shulton. Thank you. Ma'am, please begin.

Thank you, Operator. Good afternoon, everyone. This is Mariah Shulton of LHA Investor Relations. On the call today, President and CEO Peter Holt will review our second quarter and provide an update of the business. CFO Jake Singleton will detail our financial results. Then Peter will close with a summary and open the call for questions. Please note, We are using a slide presentation that can be found at ir.thejoint.com forward slash events. Today after the close of the market, the Joint Corp. issued its financial results for the quarter ended June 30, 2020. If you do not already have a copy of this press release, it can be found in the investor relations section of the company's website. As provided on slide two, please be advised today's discussion includes forward-looking statements. including statements concerning our strategy, future operations, future financial position, and plans and objectives and management. Throughout today's discussion, we will present some important factors relating to our business that could affect these forward-looking statements. The forward-looking statements are made based on our current predictions, expectations, estimates, and assumptions, and are also subject to risks and uncertainties that may cause actual results to differ materially from the statements we make today. Factors that could contribute to these differences include, but are not limited to, the continuing impact of the COVID-19 outbreak on the economy and our operations, including temporary clinic closures, shortened business hours, and reduced patient demand, our failure to develop or acquire company-owned or managed clinics as rapidly as we intend, our failure to profitably operate company-owned or managed clinics, and the other factors described in risk factors In our annual report on Form 10-K, as filed with the SEC for the year ended December 31, 2019, as updated for any material changes described in any subsequently filed quarterly reports on Form 10-Q, as they may be revised or updated in our subsequent filings, including the one we anticipate filing on August 7. As a result, we caution you against placing undue reliance on these forward-looking statements. and encourage you to review our filings with the SEC for our discussion of these factors and other risks that may affect our future results or the market price of our stock. Finally, we are not obligated ourselves to revise our results or publicly release any updates to these forward-looking statements in light of new information or future events. Management uses EBITDA and adjusted EBITDA, which are non-GAAP financial measures. These are presented because they are important measures used by management to assess financial performance. Management believes they provide a more transparent view of the company's underlying operating performance and operating trends than GAAP measures alone. Reconciliation of net income to EBITDA and adjusted EBITDA is presented in the press release. The company defines EBITDA as net income or loss before the net interest, tax expense, depreciation, and amortization expenses. The company defines adjusted EBITDA as EBITDA before acquisition-related expenses, bargain purchase gain, Net gain or loss on disposition or impairment, and stock-based compensation expenses. Turning to slide three, and it's my pleasure to turn the call over to Peter Holt.

Thank you, Mariah, and I welcome everybody to the call. I'd like to start by thanking all of our doctors and staff who, in the middle of this pandemic, are providing essential health care services to our patients who truly see chiropractic care as essential to their health care needs. And by utilizing chiropractic care to help reduce their pain, we're able to alleviate some of the pressures on our country's overtaxed emergency rooms and hospitals. It's hard to imagine it's only five months ago that our lives were overturned by COVID-19. As I reflect on the performance of the joint, I'm humbled and gratified by the resiliency of our business model. As we witnessed so many other retail concepts urgently reinventing themselves to survive, the strategic vision and the operating model of the joint continues to perform. as illustrated by the fact that 99% of our clinics are open, the strength of our overall financial performance, our continued growth in both franchise and greenfield clinic openings, as well as our ongoing franchise license sales. And while no one can predict the course of COVID-19 with certainty, we remain confident in our ability to adapt, to serve, and to grow in this unique environment. While Americans spend over $15 billion a year on chiropractic care, The joint continues to revolutionize access with convenient retail settings, concierge-style membership-based services, attractive pricing and hours, and without the need for insurance or appointments. Our growth strategy is to open new clinics, which builds our brand, grows familiarity with chiropractic care, and attracts new patients. Already, we're the largest and most recognizable provider of chiropractic care in the country. We utilize a franchise model as well as company-owned or managed clinics to expand in a capital-like fashion. As noted on our last call, at the onset of the pandemic, we undertook measures to enhance the cleanliness and the sanitization procedures to protect and support our patients, our doctors, and our staff. As we learn more, we continue to evaluate and improve upon the procedures and protocols. For example, we now require the use of masks by all of our doctors and staff in all of our clinics across the country. We've also reduced the number of seats in our reception areas and in some clinics removed adjustment tables from the open bay area to ensure our ability to maintain social separation. In the process, we've demonstrated that we can serve the same number of patients even though we're reducing the number of people at any one time in our clinics. As the need for pain relief grows, our patients continue to validate that chiropractic care is essential to their healthcare. Franchisees increasingly understand the strength of our value proposition. That is why in the middle of this pandemic, we're able to sell licenses in open clinics. Our business model remains unchanged, which is the foundation for our long-term growth. We continue to march toward our goal of reaching 1,000 clinics by the end of 2023. In addition to enhanced safety procedures that provide assurance to our patients, we've implemented new marketing promotions with two areas of focus. First to welcome existing patients back from membership freezes, and second to invite new patients to try our services for the first time. The whole month of June, we offered a free initial visit to all new patients, resulting in one of the highest average new patient counts per clinic for any single month in the history of our company. I'll go into more detail on the promotion, but I'd first like to review our quarterly metrics. Later, Jake will discuss our financial results in greater detail, after which I'll open the call for questions. Turning to slide four, while COVID-19 negatively impacted the second quarter of 2020 compared to the second quarter of 2019, the resiliency of our business model is reflected in our results. System-wide sales increased 2% in spite of the impact of our promotions, including the first free visits in June. Comp sales for clinics have been open for at least 13 full months decreased by 6%. Revenue increased 13%. Adjusted EBITDA was flat at $1.1 million. Unrestricted cash was $14.6 million at June 30, 2020, compared to $10.7 million on March 31, 2020. Turning to slide five, let's review our portfolio. At June 30, 2020, we had 539 clinics, of which 99% were open. The clinic composition at quarter end was 477 franchises and 62 company-owned or managed. The mix remained 88% franchise and 12% corporate. During the first full quarter of the pandemic, our clinic count increased by nine, including one new Greenfield and 12 new franchise clinics, net of the four franchise clinics that closed. The closures consisted of one clinic in the process of being relocated that will reopen, one non-traditional clinic located in Relax-A-Back store, and two of our lowest performing clinics. We're now returning to new clinic growth. As of June 30, we opened 30 clinics in 2020, one more compared to the same period last year. Our new clinics are performing well. In fact, a new clinic in Texas, which opened in June, reached aggregated sales of over $75,000 in its first two months of operation, creating another company record. Turning to slide six, for any franchise system to be selling licenses in this current climate is remarkable. making our franchise sales results all the more impressive. During the second quarter, we sold 11 new franchise licenses bringing the total to 35 year to date. We believe that to achieve this level of sales under the current environment is indicative of the positive long-term outlook of our business. I applaud our sales team, including our 22 regional developers for this performance. Our RDs continue to fuel our growth and are responsible for 80% of our franchise sales in Q2 2020. This group has risen to the occasion to serve our community and continue to accelerate the growth of our system. Our momentum continues. For example, in July, we're back to double-digit system-wide comp sales for all clinics open 13 months or more at 10%. We sold 14 licenses in July, and we opened six franchise clinics. We continue to expand corporately in the Los Angeles area, opening our third Greenfield clinic for this year. Through the end of July, our total franchise and corporate clinic count increased to 546. We know that meeting our goal of 1,000 clinics by the end of 2023 requires more than concentrating solely on franchise growth. We're also focused on corporate expansion with more greenfields. While our greenfields are performing well, it's important to note that greenfields suppress total earnings in the short term until they reach their break-even point. We believe this short-term impact on the bottom line is well worth the long-term benefit of revenue growth, greater scale, and increased national recognition. Turning to slide seven, one of our earliest and most decisive actions in the initial days of COVID-19 was to support the positioning of chiropractic care as an essential healthcare service. This became a critical point of differentiation versus other retail service concepts. It also served as a rallying cry for our doctors and our staff. It helped to guide our approach to the pandemic, that now more than ever, we need to be open to treat our patients. Being an essential healthcare service is also reflected in our marketing communications. Through video and blogs, emails and texts, clinic signage and PR, we increase the frequency of our messaging, not only to reassure our patients that we remained open, but that we're taking the necessary precautions to ensure their safety. Our content focused heavily on best practices for maintaining a healthy lifestyle, including the benefit of routine chiropractic care. With so many consumers facing anxiety related to health and finances, we recognize that accessible, affordable chiropractic care is more important than ever. So in March and April, we made it easier for our members to freeze their accounts, and in May and June, we launched two important promotions to provide patients with more opportunities to obtain the care they need. Turning to slide eight, our direct marketing promotion launched in May encouraged members to unfreeze their accounts in exchange for the incentive for the first month they came back. We moved over 22% of our frozen members to active status during this month-long promotion. Our national marketing promotion launched for the month of June offered every new patient in the United States the opportunity to get moving with chiropractic at no charge of their initial visit. During the month, we gave away over $1.7 million in chiropractic care. What's more, we converted those patients to packages and memberships at record levels, which underscores a considerable demand for chiropractic care during this pandemic. As a result, by the end of the promotion, our average number of members per clinic which is one of the most important clinic performance metrics surpass all time records, including any pre-COVID number. More importantly, we're grateful to do our part to help so many patients access chiropractic care at the joint during this difficult time. Turning to slide nine, we recently updated our patient demographics based on those who visited the joint in 2019. From the data, we continue to see a nearly even gender split with 49% of our patients being female. Additionally, we found our patients' median age moved from 39 years old to 37. The percentage of millennials who visited increased from 39% to 44%, with another 11% from Gen Z. This data reaffirms our concept is resonating with increasingly younger audience who values convenient, affordable chiropractic care at the joint. And with that, Jake, I'll turn it over to you.