The Joint Corp.

Good day, and welcome to the Joint Corp First Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. Should 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. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to David Barnard of LHA Investor Relations. Please go ahead.

Thank you, Dave. Good afternoon, everyone. This is David Barnard of LHA Investor Relations. Call today. President and CEO Peter Holt will review our first quarter 2023 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're using a slide presentation that can be found at httpsir.thejoin.com backslash events. Today, after the close of the market, the joint corporation issued its financial results for the quarter ended March 31, 2023. 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 is forward-looking statements. including statements concerning our strategy, future operations, future financial positions, and plans and objectives of management. Throughout today's discussion, we 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 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 exasperated by COVID-19 and the current war in Ukraine, which has increased our costs and which otherwise could negatively impact our business, the potential for further disruption to our operations, and the unpredictable impact on 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 of our common stock and result in class action lawsuits, our failure to mediate future material weaknesses and our internal control over financial reporting, which could negatively impact our ability to accurately report our financial results, prevent fraud, or maintain confidence, and other factors 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, 2022, 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 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. This measurement 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 gap 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, stock-based compensation expense, bargain purchase gain, net gain or loss on disposition or impairment, and other income related to the employee retention credits. Management also includes commonly discussed performance metrics. System-wide sales include revenues at all clinics, whether operated by the company or by franchisees. While franchised sales are not recorded as revenues by the company, 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 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 now my pleasure to turn the call over to Peter Holt.

Thank you, David, and I welcome everybody to the call. As we noted in March, we entered 2023 with a fortified foundation to support our clinics as well as our long-term clinic expansion and financial growth. Today, I'm pleased to report on Q1 2023, we performed well during the continued economic uncertainty and expect our robust underlying clinic model and unit economics to thrive as markets improve. For those investors who are new to the company, the joint is revolutionizing access to chiropractic care by providing affordable concierge-style membership-based services in convenient retail settings. Turning to slide four, let's review our financial metrics for the first quarter 2023 compared to first quarter 2022. System-wide sales grew 17%. Comp sales for clinics that have been open for at least 13 full months increased 8%. Revenue grew 27%. Adjusted EBITDA improved to $2 million, And on March 31, 2023, our unrestricted cash was $14.8 million compared to $9.7 million on December 31, 2022. Turning to slide five, I'll discuss our clinic metrics. During Q1, 2023, we opened 33 clinics, 29 franchised, and four greenfields. This compares to 31 clinics, 27 franchised, and four greenfields in Q1, 2022. Our greenfield strategy is to locate clinic sites where they'll capture pent-up demand in new markets where they can rapidly build a solid presence. This quarter, we augmented existing clinic clusters in California, Georgia, Missouri, and North Carolina. As previously stated, in 2023, we are focusing on supporting our existing greenfield clinic portfolio as it matures and moderating our pace of new greenfield openings. In the first quarter of 2023, we closed one franchise clinic, which will be relocated. That compares to closing one franchise clinic in the first quarter of 2022. Once again, our closure rate is one of the lowest in franchise community at less than 1%. In summary, March 31, 2023, we had 870 clinics in operation, consisting of 740 franchise clinics and 130 company-owned or managed clinics. The portfolio mix remained 85% franchise clinics and 15% company-owned or managed clinics. At quarter end, we had 218 franchise licenses in active development, which is a solid pipeline for a future franchise clinic opening. Subsequent to quarter end, in April, we opened one Greenfield clinic at Fort Dix in New Jersey. This is our fourth location open in conjunction with the Army and Air Force Exchange Service. Turning to slide six, in Q1 2023, we sold 17 franchise licenses, which is the same number as Q4 2022 and compared to 22 licenses sold in Q1 2022. This past quarter, existing franchisees bought approximately 59% of our new licenses. This means that even in uncertain environments, those that are intimately involved in our network are reinvesting in the brand. This is a powerful indicator of the strength of our business model, demonstrating the health and viability of our franchise system. On March 31, our RD count remained 18, with our aggregate 10-year minimum development schedule for the new RD territories established since 2017 at 626 clinics. Turning to slide 7, let's review our marketing efforts. New patient acquisition continues to be a focus. For Q1 of 2023, the average number of new patients per clinic was down approximately 7% from the same quarter a year ago. To further improve new patient leads and conversions, our marketing team has invested in paid channel maximization and new paid digital tactics, as well as prioritizing non-digital approaches such as guerrilla marketing. We've created multiple learning modules to effectively walk our franchisees through best practices in digital marketing, guerrilla marketing, traditional awareness marketing, and referrals. In February, we held our annual Love the Joint social media campaign and giveaway where 12 lucky winners received a gift of one year of free chiropractic care. During this promotion, we saw significant increases in our overall engagement in the Joint's national Instagram account where we gained almost 15,000 entries and comments and more than 20,000 likes, and attracted over 13,000 new followers. In March, we held our New Patient Contest. This event incentivized clinic teams to promote the joint's $29 new patient offer via signage, referral cards, and local business partnerships and community events. For March, the network increased new patients over 19% compared to the prior three-month average. In terms of our digital efforts, in March we also launched a test to capture leads through a chat technology as well as leverage enhanced doctor of chiropractic profiles on an online medical site as a new source for new patient leads. For the quarter, organic traffic to the site increased 14% year over year. As a part of our PR effort, we continue to focus on the education and benefits of chiropractic care and generate brand awareness about the joint. Our PR strategies are reaching new highs, and in Q1 alone, we surpassed $1 billion in earned editorial impressions. And with that, Jake, I'll turn it over to you.