The Joint Corp.

And welcome to the joint fourth quarter 2022 financial results conference call. All participants will be in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the conference over to Mr. David Barnard, LHA Investor Relations. Please go ahead.

Thank you, Nick. Good afternoon, everyone. This is David Barnard of LHA Investor Relations. On the call today, President and CEO Peter Holt will review our fourth quarter and year-end 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 under Events. Today, after the close of the market, the joint corporation issued its financial results for the quarter in December 31st, 2022. If you have not already received a copy of the 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 projections, 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, our inability to identify and recruit enough qualified chiropractors and other personnel to staff our clinics, due in part to the nationwide labor shortage and an increase in operating expenses due to measures we may need to take to address such shortage, inflation exacerbated by COVID-19 and the current war in Ukraine, which has increased our costs and which could otherwise negatively impact our business, the potential for future disruption to our operations, and the unpredictable impact of our business of the COVID-19 outbreak and outbreaks of other contagious diseases, 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, short-selling strategies and negative opinions posted on the Internet, which could drive down the market price for a common stock and result in class action lawsuits, our failure to remediate 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 factors described in our filings with the SEC, including a section entitled Risk Factors in our annual report on Form 10-K for the year ended December 31, 2022, which is expected to be filed with the SEC on March 10, 2023, 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 discussion of these factors and other risks that may affect our future results or the market price of our stock. Finally, we're 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 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. Management also includes commonly discussed performance metrics. System-wide sales include revenues at all clinics, whether operated by the company or by franchisees. While franchise sales are not recorded as revenues by the company, management believes the information is important in understanding the company's financial performance because these sales are the basis on which the company calculates and records royalty fees and are indicative of the financial health of the franchisee base. Comp sales include the revenues from both company-owned or managed clinics and franchise clinics that in each case have been open at least 13 full months and exclude any clinics that have closed. Turning to slide three, it's my pleasure to turn the call over to Peter Holt.

Thank you, David, and welcome to the call. I'm delighted to speak with you today to review our strong close to 2022 and our solid positioning for long-term growth. Throughout 2022, we effectively managed economic challenges which accumulated in accelerated comps in the fourth quarter. This fortified our foundation as we entered 2023. For those investors who are new to our company, the joint is revolutionizing access to chiropractic care by providing affordable, concierge-style, membership-based service in convenient retail settings. Our robust underlying business model and unit economics are the basis for our long-term profitable growth and continue to fuel our clinic expansion. Turning to slide four, I'll review our optimal metrics that demonstrate the growth across the board. During 2022, our doctors of chiropractic at the joint performed 12.2 million adjustments, up from 10.9 million in 2021. During the year, we treated 1.6 million unique patients, up from 1.4 million in 2021. Of those treated, 845,000 were new patients, up from 807,000 in 2021. Now to review our financial metrics for 2022 compared to 2021. Turning to slide five, system-wide sales grew to $435.3 million, increasing 21%. Our comp sales for clinics that have been open for at least 13 full months grew 9%. Revenue increased 26%. Adjusted EBITDA was $11.5 million. And at December 31, 2022, our unrestricted cash was $9.7 million compared to $10.3 million at September 30, 2022. Turning to slide six, I'll discuss our clinic metrics. During 2022, we opened a record 137 total clinics, 121 franchised and 16 greenfields. This increased from 130 in 2021, which consisted of 110 franchised and 20 greenfields. During Q4 2022, we opened 34 clinics, 30 franchised and four greenfields. This compares to 2021 with 43 clinics, 34 franchised, and nine greenfields. Regarding franchise clinic closures, there was one during the fourth quarter for a total of five for the full year compared to three for the both fourth quarter and full year of 2021. Thus, our annual closure rate remains low, less than 1%, and continues to lead the franchise community. In Q4, we acquired eight previously franchised clinics, six in Northern California, and two in North Carolina. and sold a company-managed clinic in California to a franchisee. For 2022, we acquired 16 clinics and sold two clinics for a net of 14, which compares to 12 acquisitions and no dispositions in 2021. As noted, we opened four greenfields in the fourth quarter, bringing our total for 2022 to 16 compared to 20 in 2021, reflecting a heavy investment in greenfields over the past two years. In 2023, we plan to moderate the pace to allow Greenfield Clinic portfolio to mature. We strategically locate our Greenfield Clinics where they can capture pent-up demand and in new markets where we can rapidly build a solid presence. In 2022, we entered into Kansas City with four clinics and added to our Army and Air Force Exchange Service two locations, one in Texas and Florida, and augmented our existing clinic clusters in California, Arizona, and Virginia. In summary, at December 31, 2022, we had 838 clinics in operation, consisting of 712 franchise clinics and 126 company-owned or managed clinics. The portfolio mix was 85% franchise clinics and 15% corporate clinics. At year end, we had 235 franchise licenses in active development. This metric continues to demonstrate the strong pipeline for franchise clinic openings. Since the beginning of 2023 and through today, we've opened two new greenfields in existing clusters of Georgia and North Carolina. Turning to slide 7, in Q4 2022, we sold 17 franchise licenses, up from 12 in Q3 2022 and compared to 44 in Q4 2021. For 2022, we sold 75 licenses, compared to the company record of 156 sold in 2021, which reflected the pent-up demand related to COVID. That said, given the economic headwinds of 2022, we're pleased with our 75 licensed sales, which is quite high compared to other franchise systems. Further, approximately 60% of our franchise licenses were to existing franchisees reinvesting in the brand in 2022, up from 50% in 2019 through 2021. This demonstrates the health and viability of our franchise system and is a validation of our franchise belief in the strength of our business model. Regarding regional developers, in October 22, we repurchased the RD rights for Philadelphia. This put our RD count at 18, where it remained at December 31, 2022. Throughout the year, RD sold 67% of our franchise licenses and support 69% of our clinics. Our aggregate 10-year minimum development schedule for new RD territories established since 2017 was 626 clinics as of December 31. Turning to slide eight, our industry-leading franchise performance continues to be acknowledged. For 2023, Entrepreneur Magazine named the joint top franchise in the chiropractic service category and top 10% in the franchise 500. Franchise Business Review identified us as the top franchise for 2023 and one of the most profitable franchises and the top franchise for veterans. And for the eighth year running, Franchise Times recognized the joint as experiencing rapid yet sustainable growth on its 2023 Fast and Serious list. Additionally, FranData, which provides franchise business intelligence, is similar to a FICO score for consumers, rated the joint fund score at 910 out of 950, compared to the average of 593. They also presented us with the top fund award for the second year in a row. Turning to slide nine, let's review our marketing efforts. In Q4, we kicked off our promotion season with our new Give Thanks, Give Back social campaign sweepstakes. This is our strongest social campaign in our history with over a 2,700% increase in engagements from our patients and followers. We leveraged the surge of the momentum surrounding this campaign and shortly thereafter launched our annual holiday promotions, both of which topped last year's performance. Compared to 2021, Back Friday grew 32% and end-of-year promotion increased 44%. We continue to enhance our media campaigns in a variety of our sophisticated digital marketing programs. Digital leaves grew to 62% of all new patients in 2022, a record high for the joint, which further validates the importance of our digital program in patients' journey to chiropractic. In terms of our organic search engine traffic, we improved our website structure and responsiveness to optimize search engine readability in order to rank more favorably. As a result, we're demonstrating year-over-year growth in our web traffic Finally, in 2022, utilizing our public relation efforts, we continue to educate and create awareness around the chiropractic care and its benefits, thereby building value and equity in the brand with almost 900 million earned media impressions throughout the year. Before I turn it over to Jake, I would like to introduce our new Chief Human Resource Officer, Chrishell Tennyson. In today's competitive job market, recruiting, developing, and retaining top talent is crucial. Chrishell's nearly 30 years of experience and cross-functional focus of successful performance delivery will be instrumental in fostering our expansion and attracting the right people to join us in our mission to improve quality of life through routine and affordable chiropractic care. And with that, Jake, I'll turn it over to you.