The Joint Corp.

Good day, and welcome to the Joint Group Corp First Quarter 2024 Financial Results Conference Call. All participants are 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. You may press star, then one on a touch-tone phone. To withdraw your questions, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to David Bernard with LHS Investor Relations. Please go ahead.

Thank you, Kaylee. Good afternoon, everyone. This is David Barnard of LHA Investor Relations. Joining us on the call today are President and CEO Peter Holt and CFO Jake Singleton. Please note we're using a slide presentation that can be found at httpsir.thejoint.com under Events. Today, after the close of markets, The joint corporation issued its results for the quarter ended March 31st, 2024. If you not already have 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 that today's discussion includes forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts may be considered forward-looking statements. Although the company believes that the expectations and assumptions reflected in these forward-looking statements are reasonable, it can make no assurances that such expectations or assumptions will prove to have been correct. Actual results may differ materially from those expressed or implied in forward-looking statements due to various risks and uncertainties. As a result, we caution you against placing undue reliance on these forward-looking statements. For discussion of the risks and uncertainties that could cause actual results to differ from those expressed or implied in the forward-looking statements, please review the risk factors detailed in the company's reports on Forms 10-K and 10-Q, as well as other reports that the company files from time to time with the SEC. Finally, any forward-looking statements included in this earnings call are made only as of the date of this call. and we do not take any obligation 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're 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, which includes contract termination costs associated with reacquired regional developer rights, stock-based compensation, bargain purchase gain, net gain or loss on disposition or impairment, costs related to restatement filings, restructuring costs, 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 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. System-wide 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 Holtz.

Thank you, David, and I welcome everybody to the call. The Joint is revolutionizing access to chiropractic care by providing affordable concierge-style membership-based services in convenient retail settings. We began 2024 with a vision to be the champions of chiropractic, and we focused on increasing new patient counts, improving existing patient engagement, and positioning to re-franchise the vast majority of our corporate portfolio. And we're making solid progress. Additionally, during the first quarter, we grew revenue, improved the bottom line, and tripled our franchise sales sequentially. Turning to slide four, I'll review the first quarter of 2024 compared to the same period, 2023. System-wide sales grew to $126.3 million, increasing 9%. System-wide comp sales for clinics that have been open for at least a full 13 months increased 3%. Revenue increased 5%. Adjusted EBITDA was $3.5 million for Q1 2024, up 74% over the same period last year. On March 31, 2024, our unrestricted cash was $18.7 million, compared to $18.2 million at December 31, 2023. Turning to slide five, I'll discuss our clinic metrics. We opened 23 franchise clinics and closed four in the first quarter of 2024, compared to 29 franchise clinics opened and one closed in the first quarter of 2023. At March 31, 2024, our total clinic count reached 954 units, consisting of 819 franchised and 135 corporate, up from 935 opened clinics, 800 of which were franchised, at the end of the year 2023. The clinic portfolio mix remains 86% franchised and 14% company-owned or managed, and although it's expected to shift during the year as we execute our re-franchising strategy. Turning to slide six, we're focused on re-franchising strategy as our primary initiative in 2024. As discussed, we received over 100 requests for information and have been vetting the opportunities to identify the most effective franchisees. We're going through a structured process to continue to conduct negotiations with multiple qualified franchisees in regard to the sales of our corporate clinics. There's been a strong interest in larger transactions. As these are more complex, we've identified an investment bank specializing in re-franchising to help us. Working together, we expect to ensure we re-franchise to the best of our franchisees, accelerate the process, and create value for all of our stakeholders. We are well in our way of generating capital to be reinvested in brand, marketing, RD territory acquisitions, and or stock repurchases, among other options. Turning to slide seven, I'll review our franchise license sales. During Q1, we sold 15 franchise licenses compared to 17 in Q1 2023. Of the licenses sold, 87% of the franchisees were new to the joint. This reflects investment and validation of our franchise concept. Q1 2024 tripled sales compared to Q4 2023, a solid increase given the ongoing high interest rates, inflation, and strong employment. I do want to note that franchise sales may also be impacted by our re-franchising strategy. On March 31, 2024, we had 166 franchise licenses in active development, as well as 17 regional developers with an aggregate 10-year minimum development schedule for 674 clinics. We do not plan to establish any new additional regional territories and will consider opportunities to require territories as the RD territories mature. Turning to slide eight, I'll review our marketing efforts. In Q1, we conducted our annual patient survey, which provided great insights into our brand perception. We're proud of the results of the survey and we remain committed to doing even better. First, the joint continues to demonstrate our ability to grow the market, with 36% of our patients being new to chiropractic in 2023. Next, patients gave the joint a strong net promoter score of 64%, and an amazing 92% of patients with prior chiropractic experience rated the joint as better or as equal to the previous care they'd received. Additionally, research led us to redirect some of our marketing resources from older campaigns to new social media influencer efforts. With strong positive perception from consumers new and not new to chiropractic, as well as our existing patients, our data indicates that the biggest opportunity is to drive awareness of chiropractic care in general and consideration of the joint in particular. In light of this data, we've made a strategic decision to forego our in-clinic new patient contest this past March to invest in driving consideration in April. We're doing that through evolving our to-go markets approach at all levels of the marketing funnel. At the top of the funnel, we've introduced social media influencers last month. Our lineup features both health and wellness as well as athlete influencers, including Sherry Hawkins, U.S. track and field Olympian. We're partnering with these influencers to reach their broad audiences as well as to showcase the benefits of chiropractic care in a relevant way. In addition, several co-ops will feature regional influencers to support the national campaign, driving consideration in their local markets by leveraging relevant personalities. We're also testing a variety of new promotions, channels, and tactics in our co-ops to better optimize our promotions and media mix based upon the market and the patient base. In Q1, we continued testing digital initiatives with our patient experience roadmap. We're seeing success in driving new patients in our initial visit bookings test by providing the opportunity for new patients to book an appointment to complete their initial exam and visit. Patients who have participated indicated that the booking was a positive experience and important to their choosing a joint. We've also made progress in replacing our patient paper intake forms with an enhanced digital intake process. and are now in the next phase of testing before our rollout. Finally, the team is hard at work in creating stronger local store marketing tools. Working with the development team and leveraging the wealth of data that we have about our patients, we're implementing a clinic segmentation strategy to provide more effective local store marketing programs. And with that, Jake, I'll turn it over to you.