The Joint Corp.

Good day and thank you for standing by. Welcome to the Joint Corporation First Quarter 2021 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 and then the number 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to Mariah Shilton of LHA Investor Relations. Please go ahead.

Thank you, Rachel. We are on slide one. Good afternoon, everyone. This is Mariah Shilton of LHA Investor Relations. On the call today, President and CEO Peter Holtz will review our first quarter 2021 performance metrics and provide an update on 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 year and quarter ended March 31st, 2021. 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 of 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 possibly operate company-owned or managed clinics, and any 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, 2020, as updated or revised for any material changes described in any subsequently filed quarterly reports on Form 10-Q or other SEC filings. We anticipate filing our March 31, 2021, 10-Q on May 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 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. 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 EBITDA and adjusted EBITDA is presented in the press release. The company defines EBITDA as net income or loss before 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 is my pleasure to turn the call over to Peter Holt.

Thank you, Mariah, and I welcome everybody to the call. I'm delighted to speak with you today. We've entered 2021 well-positioned with a resilient business model, an accomplished team operating at a very high level, and a strong financial position. During the first quarter, we continue to execute our plan to accelerate growth and deliver strong results. In April, we celebrate our 600th clinic opening, and we continue to strive to reach our goal of 1,000 clinics in operation by the end of 2023. Let me be perfectly clear. This is just one of many milestones and just the beginning of our long-term growth blueprint. Before I elaborate, I'll review our operational and financial performance for the quarter. I'd like to begin by welcoming and educating our new investors. The Joint is revolutionizing access to chiropractic care. Our core concept has remained steadfast. 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 on our brand, increase awareness of the efficacy of chiropractic care, attract new patients, and open more 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. Turning to slide four, while Jake will discuss our financial results in detail in a minute, here are a few highlights of our strong first quarter 2021 results. Revenue grew 29% compared to first quarter 2020. System-wide sales grew $77.8 million, increasing 28% compared to the first quarter last year. Our comp sales for clinics that have been open for at least 13 full months grew 21% compared to the same period in 2020. Adjusted EBITDA more than doubled to $3.5 million. And on March 31, 2021, our unrestricted cash was $17.8 million, compared to $20.6 million at December 31, 2020. Turning to slide five, in late March, we held our virtual annual awards program, where we honored the top 2020 individual and clinic performances in our network. Our clinics achieved new highs even during the pandemic. Of the 73 new clinics opened in 2020, 15 achieved Go Elite status, meaning that they acquired over 400 patients and recorded more than $30,000 in sales in the first two months of operation. In fact, 169 clinics achieved more than $550,000 in sales in 2020, up 19% compared to 2019. That included nine platinum clinics with over $1 million in sales, up from four platinum clinics the previous year. Our undisputed sales champion earned diamond clinic status for the second year in a row with over $1.5 million in annual sales. All of this illustrates the degree to which our clinic teams, both franchised and corporate, are motivated to achieve new levels of success. They see the consumer demand. They see the power of this business model. They see the brand differentiation. And they see our category leadership. We acknowledge all of the outstanding performers and look forward to welcoming an even greater number of clinics into the ranks in 2021. Turning to slide six, let's review our portfolio. Regarding clinics during Q1, we opened 12 new franchise clinics and one greenfield, compared to 16 and one in 2020, respectively. We did not close any clinics in this quarter. At March 31, 2021, we had 592 clinics in operation, consisting of 527 franchise clinics and 65 company-owned or managed clinics, maintaining a mix of 89% franchise and 11% corporate. We also had 260 franchise agreements in some level of development. That compares to 253 at the end of December 31, 2020, and reflects the increased interest in our franchise system. We're on track with our prior guidance of opening between 80 and 100 franchise clinics this year. On April 1st, we expanded the corporate portfolio further. We opened our second greenfield of the year in Yuma, Arizona, and in addition, we acquired eight previously franchised clinics, all of which were expected to be immediately accretive to the bottom line. Two of the clinics are in the Phoenix-Scottsdale market, expanding our presence in our strong headquarters region. Six of the clinics are in North Carolina, This transaction, made possible by the recent repurchase of the regional developer rights for that territory, broadens our foothold in the southeast. All of these acquisitions were anticipated and included in our prior guidance of increasing company-owned or managed clinics by 20 to 30 clinics in 2021 through a combination of both greenfields and franchise clinic purchases. Turning to slide seven. In the first quarter of 2021, we sold 26 franchise licenses compared to 24 in the first quarter of 2020. 81% were sold by our regional developers. RDs are becoming more productive in their roles, and we're attracting a higher quality of new franchisee, well capitalized with a greater sophistication and multi-unit experience gained from other systems. We utilize the RD strategy to accelerate growth. Generally, we enter a 10-year agreement with RDs to assist with the sale and support of clinics. RDs have a goal to maximize the number of franchise clinics in their territory and a contractual obligation for the development of a minimum number of clinics, which is front-loaded. When markets reach maturity, it's not unusual for the franchisor to repurchase the RD rights. As we discussed in our previous call in March, we did so in two well-run mature markets, North Carolina on December 31, 2020, and Georgia on January 1, 2021. The purchase price for these transactions totaled $2.4 million. As a result of these RD repurchases, 69 franchise clinics and 37 signed franchise license agreements for unopened clinics shifted from management by RDs to corporate management, thereby eliminating the RD sales commission and royalties of 3% on gross sales for those clinics. The transactions are immediately accretive and expand our margin contributions. On March 31, 2021, 68% of our clinics were supported by our 21 RDs, which covered 57% of the metropolitan statistical areas, our MSAs. Today, our aggregate 10-year minimum development schedule for new RD territories established since 2017 comes to 486 clinics. This large foundation of clinic commitment bodes well for our continued clinic expansion and sales growth. Turning to slide eight, let's discuss marketing. In March, we were pleased to attract a record number of new patients in our system. This was 11% greater than our previous system high, which was in March of 2019. This is a significant development as the average number of new patients was the metric most negatively impacted by the pandemic and is a key ingredient for our growth of our membership model. Many factors are driving our momentum, from easing of COVID-related restrictions by local governments to increases in local advertising spending by our franchisees, to continued success of our brand building efforts, to the growing market strength of our regional co-ops, and the innovations in our marketing technology platforms. In addition to new patient records, we also rolled out a new grand opening program for our clinics in Q1 2021, strengthening awareness marketing, enhancing our digital tactics and lead nurturing, as well as refreshing our advertising and our clinic signage. During 2020, our average clinic break-even sales levels was reached within six months of operation. We expect the program to further strengthen our new clinic sales ramps while also enabling us to scale better with our accelerated pace of expansion. Turning to slide nine, let's review Access, our new IT platform. Access continues to be the most important initiative of the year, and I'm excited to say that we're getting closer to delivering version 1.0. Initially, it will be a lift and shift. meaning that the first version, we're simply replicating the functionality of our current system. Once that conversion is complete and we're established on this powerful new Sugar CRM platform, it ultimately will provide an improved point of purchase systems, financial systems, business intelligence, marketing automation, and patient feedback capabilities, among many other features. We're now focused on training heavy users and finalizing our due diligence to minimize system disruptions on the rollout. It's essential that this new platform be fully tested and that every franchisee is prepared for acceptance of the new system. We will complete this crucial project. As we complete this crucial project, we will not jeopardize it by rushing or shortcutting the process to meet an artificial timeline. We continue to target summer 2021 for our formal rollout. And with that, Jake, I'll turn it over to you.