The Joint Corp.

Ladies and gentlemen, thank you for standing by and welcome to the Joint Corp. Q3 2020 Financial Results Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. If anyone should require assistance during the conference, please press a star, then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to turn the call over to Ms. Mariah Shelton. Thank you, ma'am. Please go ahead.

Thank you, Operator. Good afternoon, everyone. This is Mariah Shilton of LHA Investor Relations. On the call today, President and CEO Peter Holt will review the third quarter and provide an update of the business. CFO Jake Singleton will detail the 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 final financial results for the quarter ended September 30, 2020. If you did 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 of management. For 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 any revised or updated in our subsequent filings, including the one we anticipate filing on November 6th. 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 a discussion of these factors and other risks that may affect our future results or the market price of our stock. Finally, we are not obligating 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. They 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 net interest, tax expense, Appreciation 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 is my pleasure to turn the call over to Peter Holt.

Thank you, Mariah, and I welcome everybody to the call. Our growth momentum once again is taking hold as reflected by our third quarter performance. Chiropractic care is an essential health care service, which is the foundation of our business model's resiliency. I'd like to thank all of our doctors and staff for their service to our patients and thank our patients for their confidence in the joint. We've seen so many companies negatively impacted by the pandemic and forced to rethink their business models. Here at the joint, our core concept has remained unchanged, outside of increased standardization and cleanliness procedures that we implemented to protect our patients and staff. While we cannot predict the end of the pandemic, what we've experienced is that our patients have continued to rely on their chiropractic care as essential to their health. This ability to serve patients and deliver performance continues to attract new investors. For them, I'm going to point out that the joint is revolutionizing access to chiropractic care. We're located in convenient retail settings. We provide concierge-style membership-based services without the need for insurance or appointments with attractive pricing and convenient hours. Our growth strategy is to build our brand, increase awareness of chiropractic care, and attract new patients. We continue to open new clinics in a capitalized fashion with our hybrid model of franchise and corporate owner managed clinics. We're already the largest and most recognizable provider of chiropractic care in the country. Given the high level of fragmentation among chiropractic care providers, we have a significant opportunity to continue increasing our market share as we redefine and expand the market itself. I'd like to review our quarterly metrics and activities, and then Jake Singleton, our CFO, will discuss the financial results in greater detail, after which I'll comment on the market and open the call for questions. Turning to slide four, we reported solid financial results in our metrics improved each month throughout the quarter. Today, I'll compare third quarter 2020 to third quarter 2019. System-wide sales reached 68.3 million, up 21%. Comp sales for clinics that have been open for at least 13 full months were up 12%. Revenue grew 21%. Adjusted EBITDA increased to $2.6 million, making it the strongest quarter in the company's history since going public, up 84%. And our unrestricted cash rose to $18.3 million at September 30, 2020, compared to the $14.6 million at June 30, 2020, Driven primarily from the increase in cash flow from operations. Turning to slide five, let's review our portfolio. During the quarter, our new clinics primarily expanded into markets where we already have a footprint, including Texas, Florida, Georgia, North Carolina, and California. We opened one greenfield in the Los Angeles area and 21 new franchise clinics nationwide. We also closed one franchise clinic. This quarter, we opened 22 new clinics equal to the third quarter 2019 and compared to 13 in the second quarter 2020. At September 30, 2020, we had 560 clinics in operation. The composition of quarter end was 497 franchise clinics and 63 company-owner managed clinics for a mix of 89% franchise and 11% corporate. Turning to slide six, for any franchise system to be selling franchises in this business climate is remarkable. In the third quarter of 2020, we sold 30 franchise licenses, compared to 28 third quarter 2019 and 11 in the second quarter 2020. Year-to-date, we've sold 65 new franchise licenses. Once again, we thank our sales team for their dedication to sourcing great franchise candidates. We continue to believe that achieving this level of sales in this current environment is a powerful indicator of our positive long-term outlook for our business. By expanding our reach, our regional developers, or RDs, continue to accelerate our growth. During the quarter, they were responsible for 80% of our franchise sales. In August, we welcomed our 23rd regional developer who purchased the territorial rights of the state of Wisconsin and a portion of Illinois. This new RD was a former wealth management executive and has been a successful multi-unit franchisee of the joint since 2014. The territory has a minimum 10-year development requirement of 19 new franchise clinics. In aggregate, the total 10-year minimum development schedule for the new RD territories established since 2017 comes to 475 clinics. This large foundation of clinic commitment bodes well for our continued clinic expansion and sales growth. We remain on track to achieve our goal of opening a thousand clinics by the end of 2023. Our strong licensed sales set the stage for increased future franchise clinic openings. Additionally, we plan to augment this expansion by opening new corporate greenfields, all of which increases our revenue, scale, and brand recognition. Turning to slide seven, during the initial months of the pandemic, our brand messaging featured a strong emphasis on safety and support. We were in frequent communication with patients and staff about the joint and what we're doing to reduce the risk of COVID-19 in our clinics. We had also had a content focused on tips and recommendations for maintaining a healthy lifestyle while positioning chiropractic care as an essential healthcare service. In Q3, we built upon the foundation with a message of reclaim your routine. This message of empowerment coincided with our third annual summer sale promotion in August, which targeted lapsed patients of the joint with a special membership incentive. This was our most successful summer sale promotion to date, which resulted in record number of new patient conversions per clinic and record number of total active members per clinic. As we close out 2020, we'll continue to promote the benefits of routine chiropractic care during the pandemic. Last month, we asked our patients to send us their personal testimonials on how chiropractic has improved their health and received thousands of submissions over social media. Some of these patients will be featured in our future campaigns as we continue to grow awareness of the efficacy of chiropractic care. In November and December, we'll hold our annual Black Friday sell and our year-end membership promotion. Over the years, these campaigns have delivered strong or significant value to our patients and driven strong incremental sales for our clinics. Turning to slide eight, let's review Axis, our new IT platform. Axis will provide us improved point of sale systems, financial systems, business intelligence, marketing automation, patient feedback capabilities among many other new features. As those who follow us may recall, we've nearly completed the development and start testing Axis prior to COVID-19. We then paused the rollout to focus on helping our franchise community respond to the impact of the pandemic. In the third quarter, we returned our attention to access. As we prepare for the final rollout, it is critical that the new platform is fully tested and that every franchisee is prepared and trained for acceptance of this new system. As we complete this critical project, we will not jeopardize it by rushing or shortcutting the process to meet an artificial timeline. It's now anticipated that the access rollout will be complete in the first half of 2021. And with that, Jake, I'll turn it over to you.