The Joint Corp.

Ladies and gentlemen, thank you for standing by, and welcome to the Joint Corp Q1 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 if you would like to ask a question during that time, simply press star 1 on your telephone keypad. If anyone should require assistance during the conference, please press star 0. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, David Barnard, LHA Investor Relations. Please go ahead, sir.

Thank you, Alexander. Good afternoon, everyone. This is David Barnard with LHA Investor Relations. On the call today, President and CEO Peter Holt will review our first quarter 2022 performance metrics and provide an update on the business. CFO Jake Singleton will detail our 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 httpsir.thejoint.com events. Today, after the close of market, the Joint Corp issued its financial results for the quarter ended March 31st, 2022. 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, inflation exacerbated by COVID-19 and the current war in Ukraine, our failures 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 on the Internet, which could drive down the market price of our common stock and result in class-action lawsuits, our failure to remediate the current or future material weaknesses in our internal controls over financial reporting, which could negatively impact our ability to accurately report our financial results, prevent fraud, or maintain investor confidence, and other factors described in our filings with the SEC, included in the section under risk factors in our annual report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 14, 2022, 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 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 and 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. Turning to slide three, it is my pleasure to turn the call over to Peter Holt.

Thank you, David, and I welcome everybody to the call. During the first quarter of 2022, we continue to drive growth of our retail-based chiropractic clinic concept. We opened new franchise and company-owned or managed clinics, bringing the total to 736 at the end of March 31, 2022, with our corporate portfolio reaching the 100 clinic milestone. In addition, year-to-date, we've acquired two regional developer territories, which support our corporate clinic growth strategy. Throughout the year, to advance our growth, we intend to execute on three enterprise initiatives. Forging the chiropractic dream by offering the best career path for doctors of chiropractic. Harnessing the power of our data by leveraging our new CRM platform and accelerating the pace of clinic growth through continuous improvement of our comprehensive franchise sales and clinic opening strategy. Guided by this strategic plan of action, we believe that we're well positioned to achieve our goal of 1,000 clinics in operation by the end of 2023 creating the foundation for continued future growth. Before I go into 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 attractive pricing and convenient hours without the need for 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, most recognizable provider of chiropractic care in this country, and yet we account for approximately 2% of this highly fragmented, nearly $18 billion chiropractic market. As such, we have a significant opportunity to continue to increase our market share as we further refine and expand the market itself. Turning to slide four, I'll review our financial highlights. Later, Jake will discuss the results in detail. For first quarter 2022, compared to first quarter 2021, system-wide sales grew $98.8 million, increasing 27%. Our comp sales for clinics that had been open for at least 13 full months grew 15%. Revenue increased 28%. Adjusted EBITDA was $1.8 million, reflecting macroeconomic conditions as well as expected margin compression from the recent corporate green fill opening. And at March 31, 2022, our unrestricted cash was $18.3 million compared to $19.5 million at December 31, 2021. Turning to slide five, let's review our portfolio. Regarding the clinic expansion, during Q1 2022, we opened 31 clinics, up from 13 clinics in Q1 2021. Of the 31 opened this quarter, four were Greenfield clinics and 27 were franchise clinics. which is the highest number of franchise clinics opened in any given first quarter. Also during Q1, one franchise closed compared to none last year, same period. The joint continues to have exceptionally low closure rates of less than 1% annually. Three of our Greenfield Clinic openings in Arizona, California, and New Mexico reinforced our strategy for enlarging our presence in corporate clusters. Our fourth Greenfield Clinic opened in MacDill Air Force Base in Tampa, Florida, which is the second clinic opened as a part of our agreement with the Army and Air Force Exchange Services to install our clinics on a military basis and provide chiropractic care to our members of the military and their families. In summary, in March 31, 2022, we had 736 clinics in operation, consisting of 636 franchise clinics and 100 company-owned or managed clinics, and maintained the same portfolio mix compared to December 31 with 14% corporate clinics and 86% franchise clinics. At the end of the quarter, we also had 278 licenses in active development, similar to the 283 at December 31, 2021. This metric continues to demonstrate the strong pipeline for franchise clinic openings and reflects both the accelerated number of franchise openings as well as the ongoing increased interest in our franchise system. Turning to slide six, we'll review our regional developer strategy and our franchise license sales. In Q1-22, we sold 22 franchise licenses, of which RD sold 77%. This compares to 26 franchise license sales in Q1-21, of which RDs were responsible for 81% of the sales. We continue to attract sophisticated, well-capitalized franchisees, and our overall performance proves that our RD system accelerates growth. We employ these regional developers to identify, vet, and help manage franchisees, which leverage their knowledge and lowers our direct costs. RD responsibilities are extensive, including oversight and assistance with franchise sales, site selection, clinic build-out, landlord relations, training, marketing plan implementation, and co-op formation. That said, in certain circumstances, we'll acquire mature RD territories to benefit from the related economics and to other occasions we'll acquire RD territories for those who choose to leave the system for financial or personal reasons. Year-to-date, we acquired two RD territory rights. In March, for $250,000, we acquired the northern New Jersey region. This newer territory represents the right to manage four existing franchise clinics, as well as the opportunity to expand our recently established cluster and open additional franchise and corporate clinics in the area. In April, for $2.4 million, we purchased the RD rights for Northern California. Our demographic modeling indicates that we have potential for 75 clinics in the area. Already, we have 20 franchises in operation, and 36 licenses that have been sold are in active development, which leaves room for another 19 sites for future corporate or franchise clinic development. As of April 1st, we had 19 RDs that support 66% of our clinics, and their territories cover 55% the Metropolitan Statistical Areas, or MSAs. Our aggregate 10-year minimum development schedule for the new RD territories established since 2017 is 642 clinics as of April 1st. Keeping in mind that that portion of these clinic counts is already opened, but the remaining unopened clinics still provide a large foundation to fuel our continued clinic expansion and sales growth. Turning to slide 7, let's review our marketing efforts. In Q1, we further increased our investment in higher-level brand advertising, fueled by our growing national marketing fund, as well as our regional co-ops. Our growing buying power has increased access to more sophisticated marketing programs to reach our target audience in individual trade areas. We continue to innovate by testing new tactics in video marketing and social media, and our public relations efforts are driving hundreds of millions of earned media impressions every month. All these efforts are building our brand and increasing our name recognition in the mass market. We rely increasingly on our digital marketing efforts to reach prospects and drive new patients to our clinics. In fact, according to our most recent attribution in Q1, over 63% of our new patients were influenced by our online marketing activities at some point in their journey to the joint. We know that younger consumers lean heavily on Dr. Google. and other websites with their healthcare education and validation. And while traditional chiropractic patients skew female and older, our patient base is an even gender split with a median age of just 36 years old, with 61% of our patient base from the Gen Z and millennial generations. In the development and management of our online marketing strategy, one challenge we often navigate is adapting to Google's frequent changes in their online search algorithms Even small changes can have implications on the joint's online search visibility and require changes to our search engine optimization activities and best practices. The algorithm changes Google made in late 21 negatively impacted our organic search traffic. While suppressed in Q1, our new patient acquisition remains exceptionally high when compared to historical levels. We're in the process of implementing additional changes to our search engine optimization activities that we believe will boost our organic search traffic and further improve our patient acquisition. Turning to slide eight, I'd like to review our initiative to improve our technology infrastructure. The global environment, including the increased political uncertainty and cyber risk, reinforces our decision last year to have moved away from our homegrown IT platform to the Sugar CRM solution designed with security and mitigation capabilities. We continue to improve upon our initial CRM implementation focusing on process efficiency and enhancing the patient experience. We've completed the work for a conceptual design of the patient portal, and to harness the power of our data, we've engaged an outside partner and have begun the work onto the design of our enterprise data warehouse. These critical initiatives will continue to significantly impact the way that we use our data and run our business. And with that, Jake, I'll turn it over to you.