The Joint Corp.

Good day and thank you for standing by. Welcome to the joint Q4 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 1 on your telephone. And 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 our speaker today, Kirsten Chapman, LHA Investor Relations. Please go ahead.

Thank you, Lori. Good afternoon, everyone. This is Kirsten Chapman of LHA Investor Relations. On the call today, President and CEO Peter Holt will review our preliminary fourth quarter and annual 2021 performance metrics and provide an update on the business. CFO Jake Singleton will detail our preliminary financial results and guidance. 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 slash events. Today, after the close of market, the joint issued its preliminary unaudited financial results for the quarter and year ended December 31, 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. These fourth quarter and full year 2021 results are preliminary, unaudited, and subject to adjustments. As a result of the foregoing, certain information provided herein is subject to change. As provided on slide 2, please be advised that 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 statements we make today. Factors that could contribute to these differences include, but are not limited to, the continuing impact of 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. Our inability to identify and recruit enough qualified chiropractors and other personnel to staff our clinics, due in part to the nationwide labor shortage. short-selling strategies, and negative opinions posted to the Internet, which could drive down the market price of our common stock and result in class action suits. Our failure to remediate the current or future material weaknesses in our internal control over financial reporting, which could negatively impact our ability to accurately report our financial results, prevent fraud, or maintain investor confidence, and other risks described in our filings with the SEC, including the section entitled Risk Factors in our annual report on Form 10-K for the year ended December 31, 2021, to be filed with the SEC and subsequently filed current and quarterly reports. 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 the 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. A 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, 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. With that, it's my pleasure to turn to Peter Holt on slide three. Thank you very much.

Thank you very much, Kristen, and I welcome everybody to the call. During the fourth quarter, our retail-based chiropractic clinic concept demonstrated continued strength and resilience, even as the pandemic evolved with the Omicron variant. Throughout 2021, we successfully executed our longstanding strategy to grow by opening new clinics. both franchised and Greenfield corporate owner-managed clinics in retail settings. We ended the year with 706 clinics well-positioned to achieve our goal of 1,000 clinics in operation by the end of 2023, creating the foundation for our continued future growth. Before I go in greater detail, I'd like to welcome our new investors and summarize our investment rationale. The Joint is revolutionizing access to chiropractic care. Located in convenient retail settings, our clinics provide concierge-style membership-based services. Patients benefit from our attractive pricing, convenient hours without the need of insurance or appointments. Our growth strategy is to build our brand, increase awareness of the efficacy of chiropractic care, deliver an exceptional patient experience, and open more clinics. We're already the largest and most recognizable provider of chiropractic care in the country. And yet we only account for approximately 2% of this highly fragmented, nearly $18 billion chiropractic market. As such, we have a significant opportunity to continue increasing our market share as we further refine and expand the market itself. As we turn our attention to 2022, we're focusing efforts on three key areas. We call them our enterprise initiatives. Each are critical to advancing our growth strategy. Our first initiative is forging the chiropractic dream. by offering the best career path for chiropractic doctors. The second initiative is harnessing the power of our data by leveraging our new CRM platform. And finally, the third initiative is to accelerate the pace of our clinic growth through continuous improvement of our comprehensive franchise sales and clinic opening strategy. I'll go in more detail on the 2022 enterprise initiatives in a moment. Turning to slide four, I'll review our record-breaking operating performance metrics in 2021. The total number of adjustments performed during the year reached 10.9 million, up from 8.3 million in 2020 and 7.7 million in 2019. The total number of unique patients treated reached 1.4 million, up from 1.1 million in 2020 and 998,000 in 2019. 807,000 new patients visited the joint, up from 584 and 585,000 patients in 2020 and 2019, respectively. 85% of the system gross sales came from our monthly memberships, the same as 2020, and up from 80% in 2019. We opened 110 new franchise clinics, up from 70 and 71 in 2020 and 2019, respectively. We significantly increased our corporate greenfield clinics to up to 20 up from three and five in 2020 and 2019, respectively. And we sold 156 franchise licenses, up from 121 in 2020 and 126 in 2019. This high-level performance, even in the middle of a pandemic, validates our business model and indicates a very positive long-term outlook. Turning to slide five, I'll review our 2021 financial highlights. Later, Jake will discuss our results in detail. For 2021 compared to 2020, system-wide sales grew to $361.1 million, increasing 39%. Our comp sales for clinics that have been open for at least 13 full months grew to 29%. Revenue growth rose to 38%. Adjusted EBITDA increased to $13.3 million, up 46% compared to 2020 record of $9.1 million. And on December 31, 2021, Our unrestricted cash was $19.5 million compared to $20.6 million in December 31, 2020. Turning to slide six, let's review our portfolio. Regarding clinic expansion, during Q4 2021, we opened 43 clinics, 34 franchised and nine greenfields, up from the total of 21 clinics opened in Q4 2020. Our fourth quarter and full year 2021, we closed three clinics. This compares to two closed in Q4 2020 and seven for the full year 2020. We continue to have exceptionally low closure rates of less than 1% annually. During 2021, the total number of new clinics opened reached 130, consisting of 110 franchised and 20 Greenfield clinics, up from 70 clinics and three Greenfield clinics opened in 2020. In 2021, we acquired 12 previously franchised clinics, up from one acquired in 2020. Our expansion focuses on strategically opening greenfields in new markets and enlarging our presence in existing corporate clinic clusters and finally purchasing previously franchised clinics that will be accretive to our P&L. During 2021, we established corporate clinic footholds in the southeast region. Throughout the year, we extended our reach across our corporate portfolio in Virginia, Southern California, New Mexico, and Arizona. As we've repeatedly stated, corporate clinics contribute 100% of their top and bottom lines. Therefore, when greenfields mature, that they can have a greater economic benefit compared to franchise clinics for the consolidated company financials. However, we expect greenfields to compress margins when they first open. In the fourth quarter of 2021, we opened nine of the 20 greenfields of 2021. As such, the effect of the new corporate clinic margin pressure was greater in the fourth quarter. In summary, on December 31, 2021, we had 706 clinics in operation, consisting of 610 franchise clinics and 96 company-owned or managed clinics. Compared to September 30, our portfolio mix shifted approximately two percentage points to 14% corporate clinics and 86% franchise clinics. At the quarter end, we had 283 franchise licenses in active development. This figure demonstrates the strong pipeline for franchise clinic openings and compares to 295 at September 30, 2021, and 253 at December 31, 2020. This reflects both the accelerated number of franchise openings as well as ongoing increased interest in the franchise system. Turning to slide 7, in Q4 2021, we sold 24 franchise licenses compared to 56 in Q4 2020, with the 2020 number reflecting excess pent-up demand after the COVID disruption. Our total 2021 franchise license sales reached 156, increasing from 121 franchise license sales in 2020 and 126 in 2019. Our franchise concept continues to attract sophisticated, well-capitalized franchisees, and we're experiencing increasing interest in our multi-unit licenses. During 2021, 56% of the franchise licenses were to existing owners reinvesting in the brand, which is a very strong validation of the business. In fact, since 2018, the trend has been the existing franchisees buy more than half the new licenses in the year. Also of note, 81% of our franchise licenses were sold by our regional developers during 2021. The RD's performance remains strong as they continue to accelerate our growth. At December 31, 2021, our 21 RDs supported 71% of our clinics, and their territories covered 59% of the metropolitan statistical areas, or MSAs. Our aggregate 10-year minimum development schedule for the new RD territories established since 2017 is 713 clinics. Keep in mind that a portion of these clinic counts is already open, but the remaining unopened clinics still provide a large foundation to fuel our continued clinic expansion and sales growth. Turning to slide 8, let's review our marketing efforts. In Q4, we launched our annual holiday promotions, our Back Friday package sale and our year-end membership promotion. Significantly, both promotions beat prior year performance with Back Friday growing 27% and end of year growing 42%. This demonstrates the continued growth potential of our limited time promotions, as well as the engagement of our clinic teams and the success of our marketing best practices. On December 1st, we launched our new national brand campaign targeting millennial consumers with a message touting the power of chiropractic care and living their best lives, as well as the joint's convenient and affordable offering. As a part of the campaign, we produced two new TV spots, updated our print ads, and promotional materials, all featuring our new brand tagline, Don't Do Pain, Do You. The work will be featured throughout 2022, reaching new prospects through our national streaming platforms, regional television buys, and other media channels. Speaking of new prospects, in 2021, we increased investment in awareness-driving market tactics funded by our growing national marketing fund, as well as our regional marketing co-ops. Tactics like these help build our brand's reach and name recognition with the greater public. This activity continues to record breaking new patient growth and boosted the proportion of our patients who are new to chiropractic. In our most recent annual independently conducted patient survey, we found that 36% of patients who visited our clinics in the 2021 had no previous experience with chiropractic care. In 2013, The first year of this survey, that number was just 16%. In 2020, it was 27%. This demonstrates our growing ability to attract a larger population of consumers who are initially unaware of the benefit of chiropractic care, which is fulfilling our vision of educating the consumer about the power and efficacy of chiropractic. Turning to slide nine, I'd like to review our initiatives to improve our technology infrastructure. As you may know, Last July, we achieved our milestone of launching our new IT platform, which we call Axis. Because our patients can visit any clinic in our network to receive their chiropractic care after extensive testing, we were required to switch the entire system from our original platform to the Axis platform overnight instead of a timed regional rollout. It was quite an undertaking. Of course, migrating from our homegrown legacy system to a licensed, scalable platform caused a few bumps, but we were pleased to accomplish this without major disruptions. And again, I want to thank our franchisees and our clinic users for their patience throughout this process. It's important to remember that this launch is only the first iteration of Access, primarily a lift and shift in functionality with updated accounting and reporting systems and greatly improved security. Our 2022-23 roadmap has us layering in additional innovations that will unlock greater value. These initiatives include improvements in our user experience, enhanced promotional capabilities, advanced analytics, marketing automation, a native mobile app, and elevated risk control measures. I'm also excited to welcome our newest member of our leadership team, Chief Technology Officer Charles Nellis, who will help lead this mission. Charles has more than 20 years of experience in healthcare and financial service industries. He and his team will spearhead our technology development, leverage our new IT platform, to sustain our position as a trailblazer and utilize our data to improve business performance. We look forward to this contribution as the Joint pursues new growth opportunities to bring routine and convenient and affordable chiropractic care across the nation. And with that, Jake, I'll turn it over to you.