Q4 2020 Joint Corp Earnings Call

March 4, 2021

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Joint Corp, Q4, 2020 financial results Conference call. At this time, all participant lines on a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today Raia Shelton of L. H T Investor Relations. Thank you. Please go ahead Madam.

Thank you Jessica good afternoon, everyone. This is Maria Shelton and L.

<unk> Investor Relations.

On the call today, President and CEO, Peter Holt will review, our year end and fourth quarter 2020 performance metrics.

And provide an update on the business.

CFO, Jake Singleton will detail our financial results.

And 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.

And I are that the joint dotcom forward slash events.

Today after the close of the market. The joint Corp issued its financial results for the year and quarter ended December 31 2020.

If you do not already have a copy of this press release it can be found and 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 and future financial performance 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.

And 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.

And our failure to develop or acquire company owned or managed clinics as rapidly as we intend.

And our failure to profitably operate company owned or managed clinics and the other factors described and risk factors and our annual report on form 10-K as filed with the SEC for the year ended December 31, 2019, and updated for any material changes described and any subsequently filed quarterly reports on form 10-Q.

And they may be revised or updated and our subsequent filings.

We anticipate filing our December 31, 2020 10-K on March 5th.

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're not obligating ourselves to revise our results or publicly release any updates to these forward looking statements and later, the 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 and GAAP measures alone.

A reconciliation of net income to EBITDA and adjusted EBITDA is presented and the press release the.

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 and.

And it is my pleasure to turn the call over to Peter Holt.

Thank you, Brian and welcome everybody to Nicole and good luck.

And as you speak with you today to review our company's performance and then you hear like no other.

Our operational success is managing the impact of the pandemic on our business supported by our clinic staff training and our patient throughout this unpredictable environment resulted in a strong financial performance and further validates the opportunity before us.

I've said, it before and reflecting upon 2020 and I do so now today I am so grateful for our entire system, our doctors wellness coordinators and franchisees regional developers corporate staff for their dedication to our mission of improving quality of life of our patients.

And this pandemic has shown car practic care truly as an essential health care service to our patients.

The joint is revolutionizing access to car parts of care.

And <unk> and convenient retail settings, we provide concierge style membership based services without the need for insurance or appointments with attractive pricing and convenient hours.

Our growth strategy is to build our brand increased awareness of the efficacy of car practic care and attract new patients and open more clinics.

We're already the largest most recognizable provider of car practic care and the country.

Given the high level of fragmentation of the Kirkpatrick industry, we have a significant opportunity to continue to increase our market share as we redefine and expand the market itself.

Our core concept has remained steadfast and adapting to the pandemic. The primary change we made to our operational practices was to increase standardization and cleanliness procedures.

This compares favorably to many other retail concepts that needed to reinvent their business models just to survive.

While we experienced that initial negative financial impact and the second quarter of 2020, our resilient business model and the effective crisis management enabled us to quickly rebound.

During the year once again, we increased our productivity, resulting in improved clinic performance and greater company profitability.

As a result, our adjusted EBITDA positive for the third consecutive year exceeded our plan and further strengthened our Foundation Foundation.

With our growth momentum reignited, we're optimistic about 2021.

Turning to slide four I'll review the performance metrics for the full year of 2020.

The total number of adjustments to perform during the year reached $8 3 million up from $7 $7 million and 2019.

Total number of unique patients treated reached $1 1 million up from 998000 and 2019.

584000 patients open the door to the joint for the very first time relatively flat compared to the 585002 thousand 19.

27% of our new patients had never been to a car practice before up from 26% and 2019.

85% of the system wide gross sales came from monthly memberships up from 80% and 2019.

We opened 70, new franchise clinics nearly equal to the 71, new franchise clinics opened in 2019.

And we sold 121 franchise licenses pretty darn close to the 126 sold in 2019.

We believe that achieving this level of performance and the 2020 environment is a powerful indicator of the positive long term outlook for our business.

Turning to slide five well Jake will discuss our financial results in greater detail in a moment I'll provide highlights to our strong fourth quarter results.

System wide sales increased 24% compared to fourth quarter last year.

Our comp sales for clinics that have been opened for at least 13 full months grew 16% compared to the same period of 2019.

Revenue grew 23% compared to the fourth quarter 2019, bringing the full year revenue to $58 7 million.

Adjusted EBITDA increased to $3 7 million top and Q3, 2020, and making it the strongest quarter and the Companys history.

Full year 2020, adjusted EBITDA rose to $9 1 million up 47% from 2019 and.

And at December 31, 2020, our unrestricted cash reached $26 million compared to the $18 3 million at September 32020, driven primarily from an increase and cash flow from operations.

Turning to slide six let's review our portfolio.

During the fourth quarter, we opened up 21, new franchise clinics and no greenfield slightly off the pace from the 25 opened in Q4 2019, which is one of our most active quarters and clinic openings and our history.

Also during the quarter, we closed two franchise clinics and acquired one franchise clinics.

For the full year 2020, we opened 70 franchise clinics and three greenfield compared to 71 franchised and five greenfield clinics and 2019.

While our pre COVID-19 guidance for the year was originally hire for franchise openings, we believe a flat number of openings and in this environment as a win.

And 2020, we've closed seven franchise clinics and acquired one franchise clinic compared to the foreclosures and <unk> acquisitions and 2019.

Despite the pandemic, we continue to experience and unusually low closure rate of one 2% and 2020.

At December 31, 2020, we had 579 clinics and operations consisting of 515 franchise clinics and 64 company owned or managed clinics, maintaining and a mix of 89% franchise and a 11% corporate.

A year and we had 253 franchise agreements and some level of development. This compares to the 204 at December 31, 2019, and is reflective of the increased interest and our franchise system.

Turning to slide seven and the fourth quarter 2020, the year of the pandemic, we achieved the highest number of quarterly franchise license sales as a public company.

We sold 56 up from 30, and the third quarter, and 23% and fourth quarter 2019 for.

For the full year 2020, we sold 121, new franchise licenses only a handful left from the previous annual highest debt last year at 126 licenses sold.

And frankly for any franchise system to be selling licenses and a business climate is exceptional and we're proud of our sales team and their dedication to attracting great franchise candidates.

Frequently I comment that franchising is a nationwide brand building exercise and a small box retail environment, our storefront, our most effective way to build our brand and.

And we have and will continue to use regional developers, our rds to extend our reach and accelerate our brand building, particularly in new markets they've been integral to our franchise sales growth since 2017, and they've been responsible for 81% of our franchise sales.

With our DS we entered into a 10 year agreement to sell and support a minimum number of franchise clinics and their territory and can negotiate extensions to that territory as appropriate.

Typically the minimum development schedule is front loaded with.

And when markets reach maturity, it's not unusual for the franchise or to repurchase the Rd rights and <unk>.

<unk>, we did so and two well run mature markets.

North Carolina on December 31, and 2020 and Georgia on January one 2021.

These transactions totaled $2 4 million as a result, 69 franchised clinics and 37 signed franchise license agreements for <unk> and opened clinics shifted from management by our DS to corporate management there.

And thereby eliminating the payments made to these rds for franchise sales commissions and royalties of 3% on the gross sales for their clinics.

The transactions are immediately accretive and expand our margin contribution.

At December 31, 2020, 419 of our clinics or 72% were supported by our 22, our DS, which covered 61% of the metropolitan statistical areas or Msas at December 31, and 2020.

On January one 2020, one we reduced that to 378 or 65% of our clinics that were supported now by 20 <unk>.

We will continue to evaluate new Rd opportunities.

Recently, we expanded the R&D for the Wisconsin region to include a portion of Michigan.

Today, our aggregate 10 year minimum development schedule is for art for Rd territories established since 2017 comes to 475 clinics.

This large foundation of clinic commitment bodes well for our continued clinic expansion and sales growth.

We're expand we're investing and the future and plan to expand our entire portfolio between franchise and corporate units well over 100 units and 2021, our strong license sales set the stage for increased future franchise clinic openings as we remain committed to achieving our goal of opening and 1000 clinics by the end of 2020, three resulting and increased revenue.

Scale and brand recognition.

Turning to slide eight let's review our franchise system for a moment.

Strengthening our franchisee relationship is a long standing priority for the joint and I'm pleased to report that we continued to make positive inroads.

According to franchise business review and independent organization, we've engaged and conduct our franchisee satisfaction surveys. Most recently in 2000 and October 2020, the joint has achieved a franchise satisfaction index or Ssi of 75%.

This is up from 65% in November of 2018, and 58% and April 17.

And emphasize score represents the weighted sum a positive responses and discounts the negative responses.

Ssi ratings allow a franchise or to benchmark their franchisee satisfaction against various industry sectors.

We scored in the top tier validating our continued efforts to improve our relationships with our franchisees.

Turning to slide nine, let's turn our attention and marketing.

And Q4, we launched our annual holiday promotions are black Friday package sale, and our year and membership promotion.

And with our clinic teams highly engaged and are and.

And using our best promotional best practices resulted in both promotions exceeding our previous record.

Black Friday sales per clinic were up 98% over prior year.

And our year end sales per clinic grew 42% over prior year.

Clearly our patients responded enthusiastically to these limited time and opportunities to save even more on car Practic care.

Sales growth and clinic expansion or increase the flow of dollars into our national marketing fund.

And we're using these resources to invest and new strategic partnerships to fuel our growth and.

And 2020, we began working with a new public relations firm to build a national profile and grow awareness of car Practic.

And 2021, we've launched two new additional partnerships with media and creative agencies to elevate our brand advertising and we look forward to releasing a new national campaign in Q2 of this year.

Finally, among the many useful patient profile insights from our most recent annual independently conducted survey I'd like to highlight according to the survey 27% of the patients who visited our clinics and 2020 had no previous experience with chiropractic care.

And 2013. This number was only 14% nearly doubling our first time users demonstrates that joins a growing ability to reach and increasing number of American consumers, who have yet to benefit from car Practic care.

Turning to slide 10, and this review access our new it platform.

Access is our most important initiative in 2021.

It will provide an improved point of purchase system financial systems business intelligence marketing automation and patient feedback capabilities. Among many other features.

And Q2 2020, we had to pause our efforts to implement axis to focus on helping our franchise community respond to the impact of the pandemic.

And the fall we reengage the access project at present, we're finalizing the user interface testing and preparing critical training programs as well as and user and clinic certification processes necessary for launching the platform.

And it's essential that that new platform be fully tested and every franchisees prepared and trained for the acceptance of the new system.

As we complete this crucial crucial project, we will not jeopardize that by rushing or shortcut and the process to meter and artificial timeline.

Currently we plan to begin a formal rollout in early summer.

And with that Jake I'll turn it over to you.

Thank you Peter.

Turning to slide 11, comparing fourth quarter 2020 to fourth quarter 2019.

System wide sales for all clinics opened for any amount of time increased to $77 6 million up 24% year over year.

System wide comp sales for all clinics opened 13 months or more were 16% compared to 26% and the prior year.

System wide comp sales for mature clinics opened 48 months or more or 10% compared to 19% and the prior year revenue.

<unk> revenue was $17 million up $3 2 million or 23%.

Company owned or managed clinics contributed revenue of $9 2 million, increasing 22% from the same period a year ago.

Franchised operations contributed $7 8 million up 24% compared to the same period last year.

Increased revenue from both categories is due to the greater number of clinics and continued organic growth.

Cost of revenues was $1 9 million up 19% over the same period last year, reflecting the increase and franchises, resulting in higher regional developer royalties and commissions.

Selling and marketing expenses were $2 1 million up.

Up 15% over the same period last year.

Reflecting the timing of the advertising spend and the fourth quarter.

General and administrative expenses were $9 5 million compared to $8 5 million.

The $1 million increase was primarily due to higher payroll and related expenses to support revenue growth into greater number of clinics.

We had record operating income of $2 8 million compared to $1 $3 million and 2019.

We recorded a net tax benefit of $7 9 million compared to a tax expense of 33002 thousand 19.

This was driven by the reversal of the valuation allowance on our deferred tax assets of $8 9 million.

Net income, including the benefit from the reversal of the tax valuation allowance was $10 6 million or <unk> 72 per diluted share compared to $1 3 million or <unk> <unk> per diluted share and the fourth quarter of 2019.

We delivered record total adjusted EBITDA of $3 7 million.

And which increased 74% compared to the same period last year.

Franchise clinic, adjusted EBITDA increased 23% to $3 8 million.

Company owned or managed clinic, adjusted EBITDA increased 49% to $2 5 million.

Corporate expense is a component of adjusted EBITDA decreased 1% to $2 6 million, reflecting our cost control efforts.

Turning to slide 12.

I will now compare the full year 2020 to 2019.

Gross sales for all clinics opened for any amount of time grew 18% to $260 million.

System wide comp sales for all clinics opened 13 months or more increased 9% and.

And significantly system wide comp sales for mature clinics opened 48 months or more which now represent 352 clinics increased 5%, which is remarkable and todays retail environment.

Revenue increased by 21% to $58 7 million meeting our guidance.

Operating income was $5 5 million compared to $3 $4 million and 2019.

Net income, including the previously mentioned and $8 $9 million benefit from the reversal of the tax valuation allowance was $13 2 million or <unk> 90 per diluted share compared to $3 3 million or 23 per diluted share in 2019.

Adjusted EBITDA increased 47% to $9 1 million exceeding our guidance.

At December 31, 2020, we had $26 million of unrestricted cash and this compares to $8 5 million at December 31 2019.

During the year cash inflows from operating activities were $11 $2 million cash.

Cash inflows from finding financing activities were $5 6 million, which were partially offset by $4 6 million and in investing activities, including $1 million for the December Rd territory repurchase the balance for capital expenditures related to <unk> and corporate clinic development.

Subsequent to year and the company repaid the PPP loan of $2 7 million, which will be reflected on the March 31, 2021 balance sheet.

On to slide 13 to review guidance.

For 2020 for 2021, we expect revenue to be between 73 and $77 million compared.

Compared to $58 7.002 million 20.

Adjusted EBITDA to be between 10, five and $12 million compared to $9 1.002 million 20.

Franchise clinic openings to be between 80, and $100 compared to 70 and 2020 and.

And company owned and managed clinics through a combination of both greenfields and acquisitions to increase between 20 and 30 compared to four and 2020.

Following our strategic plan, we expect the majority of these to be Greenfields. This will be complemented by acquisitions, which continue to be opportunistic.

There is pent up demand that will fuel openings in 2021. This is evidenced by the 253 franchise licenses and development at the end of 2020.

We're investing and our future and expect the entire portfolio of clinics to increase by over 100 units. Therefore, we continue to believe we will achieve our goal of opening 1000 clinics by the end of 2023.

I will turn the call back over to you Peter.

Thanks Jake.

<unk> said, we are investing and our future and our drive to 1000 clinics and we believe this is just the first milestone of many as we bring car practic care into the mainstream.

Looking at our long term potential we are a first mover advantage that will continue to leverage to create additional opportunities for expanded growth. For example, we can evaluate potential extensions such as ancillary products and services expand and non traditional settings, including military bases, our store and store concept and finally international expansion and those markets that are already have a strong.

Car Practic acceptance.

It is important to understand what are the todays driver of market drivers that fuel our growth.

First there's a great opportunity to capture more market share as $90 billion has been annually and the United States on back pain and of that $16 billion expense, specifically on car Practic care.

Next the fragmented market of approximately 41000 practitioners yields opportunity to gain market share as the power of our size create synergies and marketing operations and <unk>.

This has happened and other healthcare sectors, such as dentistry today dental service organizations represent 12% of the dentistry field, we estimate that today, all changed and car Practic care account for roughly 3% of the market share, including the joint which accounts for around 1%.

Finally, our specific business model continues to expand faster when compared to the chiropractic market as a whole.

And by making car Practic care available to a broader consumer market and and necessity will and convenient retail settings, we're revolutionizing access and demonstrating the power and efficacy of car Practic care, which results in attracting new clients.

As mentioned in 2020, 27% of our patients were new to car Practic they'd never visited before they visited the joint they've never seen a chiropractor.

We're not just taking existing market share, but most importantly, we're expanding the market.

This is why we significantly outpaced our industry, while the car Practic care market is expected to grow at a $1 four a CAGR over the next five years, the joint delivered a 10 year CAGR of 70%.

Our rapid growth as illustrated by our four year stock comp sales, even with the pandemic, which was now a remarkable 80%.

Our strong strong performance has been recognized.

Recently, the joint was named or increased its ranking on three important lists.

The 2021 Americas Best small companies list named a joint number 13 out of 100 companies that have market values between $300 million and $2 billion positive sales growth over the last 12 months and a share price of at least $5.

The franchise times fast and serious list 2021 evaluated the smartest growing franchise brands with a joint moving up number 17 of 17 spots compared to last year's ranking.

And the franchise times created a formula to identify fast growing franchise systems that have the staying power as an antidote to multiple other rankings that include too many one year wonders.

And finally entrepreneur is 2021 franchise 500 move the joint up 20 spots compared to last year's rankings and number 58.

The key factors and entrepreneurs evaluation and crude costs and fees size and growth support brand strength and financial strength and stability.

I've said it before while we cannot predict the ultimate and of the pandemic, while we've experiences our patients have continued to rely on car Practic care is essential to their health and our doctors and continue to treat their needs.

Once again I'd like to close by expressing my deepest appreciation to all of the car Practic team that joined car practice teams, who continue to Selflessly served during this pandemic their dedication to our mission is humbling it's.

Remarkable that in 2020, we delivered the performance, we did including record breaking quarterly franchise license sales and record annual adjusted EBITDA.

To our franchise community, our Rds, our corporate team and the joint colleagues across the country I. Thank you.

You are truly making a difference and all the lives that you touch.

Justin and I am ready to begin the Q&A.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press. The pound key please standby will compile the Q&A roster and once again that is star one if you'd like to ask a question and our first question comes from Jeff Van <unk> from B Riley. Your line is now open.

Hi, everyone first let me say congratulations on a terrific year despite COVID-19.

Really kind of a multipart question here any more color you can add and what you're experiencing and areas that are more reopened in the U S. Such as maybe Texas versus areas that are not especially reopened and I guess, how does that influence your thinking about.

How business could trend as the U S does fully reopened.

And the pandemic stage and then I guess, how are you thinking about.

Kind of the pandemic fading into the rearview mirror.

Given that you added a lot of new customers.

That were due to Cairo care do you think that might accelerate as the pandemic share phage.

Hey, Jeff. Thank you for the congrats and great questions and to.

And give a little color on that.

And have a regional impact of the pandemic as we look across the country.

And I think what I'm most struck by is we.

And have not seen any real clear geographical impacts where the market's open and we've talked about this and earlier calls.

We're looking at comps and our niche.

California compared to the Texas market, the Florida market is that there is nothing that really stands out other than perhaps Colorado, where we have had significant situation where with the directive of the Colorado Governor is that our clinics were closed there for 37 day. They were allowed to reopen but they now have to take appointments as opposed to walk in.

And so theres still some impact there but outside of the.

An example, like that what we've been seeing is really a consistent performance across the country.

And then when you get the second part of your question is how do we think about this in terms of does did that pandemic open up people to try car Patrick that maybe Didnt book for and what do we see kind of as we go through this whenever we get to this new normal when the pandemic silver.

I would say is that this really ties to our whole plan of that what we're doing is true introducing people to the power and efficacy and car practice and what we find is when people do come in and use those services for the first time is that they come back and you'll see that and our comps you'd see that and our growth.

Do we choose our medical services through referrals and so you had a great experience with a clear approach and you tell your friends and family who are and pain. We know pain is only increasing in this country and we also know that people are less and less enthusiastic about using opioids or and or surgery as a way to address that pain.

So we think that as more and more people utilize a chiropractic services that we're continually making more assessable that we'll continue to see the strong growth that we've experienced over the last four or five years.

Okay great.

And then if I could squeeze in one more just wondering latest trends that youre seeing around chiropractors operating independently those independent practitioners.

How they are doing as far as staying in business or exiting the business and then kind of the availability and quality of doctors that youre seeing out there that might be inclined to join the joint platform.

Well I think in terms of any real trends on the independent practitioners, which defines the industry is it's more anecdotal and I know that like any of these independently and fragmented markets, whether it is and car practic her hair care or frozen desserts as debt trying to operate and a pen.

NAMIC environment by yourself is incredibly difficult.

And I think that one and the reasons that we've been so effective and our and our response to the pandemic is because of the power of working as a team with our franchisees collectively working together sharing experiencing.

Pulling dollars and co ops across the country to educate consumers about about the joint and so it's hard to imagine how so many of those you've seen and business is all over the country that are closing and probably won't open, especially and the <unk> industry and I think our practice has been equally impacted by it but I don't have a study our actual data.

And then more anecdotal to tell you.

What the exact number is but what we all know it is just really tough to be out there. If you don't have some kind of support and this kind of environment.

And I think as we.

As you are touching upon the status of doctors. There is no question. This is essential for our growth is that we have a very simple model and it rests on our doctors and.

And I would say is that we have seen and increasing number of doctors.

And work for US are included or are interested in buying a franchise from us.

And so I think part of that is the pressure that's on the overall industry and that we are.

<unk>, improving and opportunity for them to find a secure and safe place to work and so I would expect that to continue I will tell you that is absolutely a strategic initiative on our part is to continue to improve our ability to attract and retain doctors that the heart of our organization.

Okay and overall do you feel like when you think about all those things do you feel like the quality of the doctors you are attracting is improving.

I do I think we can we are not done I think we can continue to make inroads we spend a lot of time on working with our doctors and and <unk>.

Helping them to truly understand our business model and how to be more effective and patient care, obviously, I'm not a doctor and car product I cant tell doctors how to practice, but we can certainly share with them the.

The best practices associated with working in a clinic and our and our and our business model and that's what we focus on and that of course, our operators a doctor.

Okay, good to hear and thanks for taking my questions I'll take the rest offline.

And thank you and our next question comes from Linda Bolton Weiser from D. A Davidson your line is now open.

Hi, congratulations on great results.

So I was curious.

And.

And looking at your long term target for 1000 clinics going out.

A couple of years.

That would average out to at least having to open 140 per year and so your guidance for 100 to 130, new clinics and 2021 and slightly below that so is that because this is just the period immediately following COVID-19 and you expect the number to ramp even more in 2012.

Two and 2023 or are you just kind of being conservative and the guidance that you're giving.

And a great to talk with you and thank you for that question and I would say is that Youre absolutely right. When you do the math, we've got to be opening up a 140 clinics and the next three years to hit the 1000.

What I would tell you is and other franchise systems, where I've seen this is debt debt. When you are really working with the concept that has legs and it has a market that is only increasing as you really do see that acceleration from year over year over year. So I wouldn't expect our growth to be linear and the sense. Okay take the those numbers divide by three and say 140.

Just said we were expecting to open up over 100 units and 2021.

I would expect that to be increasing as a percentage and total number of units opened in 'twenty, two and further increasing in 2023 to get to that 1000 units.

We're not arguing that it's going to be a lot of work to get to a 1000 units.

It's a strong goal that we're sitting here with 579 units and so we know we have a lot of work in front of us, but I think that we have a contract that's only becoming more relevant to the consumer we have and our D system, that's only actively more.

Successful and their and their performance we have a concept that's attracting more and more sophisticated franchisees and that as you get and it's kind of interesting and a franchise model is that your best franchise candidates typically come from your own clinics or your own stores. Your customers. They are in love with the concept so much not only day back to the service and product they wanted.

By that franchise and so as you open more clinics you have more of those high quality leads and leads to close so I think that there is a momentum that builds up and I believe and obviously, we believe that we're going to be able to accomplish that and we would pull back on that goal.

Yeah.

Great. Thanks, and then can you.

Given that you expect such a pickup and greenfield openings and 2021 can you kind of remind us about what the capital expenditure is per Greenfield clinic, and then do you have.

Our capex guidance.

For 2021.

Sure and we Havent given Capex Capex guidance for 2021, what we said is that we expect to expand the portfolio by 20 to 30 and then the majority of those will be greenfield units right marching towards that that growth goal.

From an economics perspective, typically the buildout cost and again, we're targeting square footage and the range of a 1000 to 200 square feet.

Build out cost is relatively simple and we would estimate that to be around 180000, depending on your market, California markets might be a little bit more for example.

But thats kind of your build out costs and then you've got some working capital losses as they march through that time to breakeven.

Great. Thanks, and then.

Does your guidance for 2021 Bacon of certain same store sales growth number that you could share with us.

We havent provided that we.

We do expect continued organic growth.

<unk>.

And when you look at the overall range as the top end of that range is a 30% increase on the top line and that'll be a complement of both unit growth and organic growth, but we haven't specifically broke out the comp figure of debt.

Okay and just finally.

Yeah.

Given the challenges of the Covid year.

And having to slightly change your operating procedures and the clinics is there anything about COVID-19 that.

Actually kind of gave you new learnings at the clinic level debt.

And that you think will actually help your operating procedures and kind of.

Permanent basis going forward.

I think absolutely and then.

Think of it really applies to all levels of our business not just in the clinic.

And our clinic level itself I think these enhanced standardization and cleanliness procedures are a really powerful and it will continue to utilize them now right. Now we are acquiring the entire system if you're in our clinic, we're not dependent on the jurisdictions and the state we're not requiring patients to be and I'm, asking if the jurisdiction and they're operating and doesn't.

But we do require regardless of what the local or state and the directors are to all of our doctors and world and this quarters to use them as debt.

And I expect that to continue on going forward no.

Thank you.

We would love to get away from that but I think that there are in fact other procedures that really focus on the cleanliness and the standardization that will continue to use for the rest of the business I think on.

And if we pull up a little bit can just look at the whole way in which a franchise system operates one of the ways that we address the pandemic was incredibly enhanced level of communication.

And we're ending up with almost weekly system wide calls and Webinars and every topic you could imagine debt increased written communication and I'll focus on safety and protection of our clinics and our patients.

And so many of those those increased forms of communication and we will continue to utilize and we recognized upon and importance of that and the debt will only and I think continuing to enhance our ability to work well with our franchise community as we become more effective and the way we communicate and there's a number of other things that I would talk to you about debt that I think is is transformative and how we will be.

A stronger company and having gone through this pandemic.

Yes, the only thing that I would layer on there Linda would be maybe on the marketing side, we had to step back and really look at our grand opening process and how to navigate that and it used to if you remember it used to be you would have kind of a grand opening weekend and you'd have.

And all kinds of additional staffing and a kind of a large rush of patients.

And that new store opening will and Covid, we had to spread that out and we realized that there was actually some benefit there so we step back and and really.

Redesigned what was already a successful program in terms of our Grand opening marketing and we're going to have kind of a much longer introductory period as it relates to attracting those new patients and that new patient offer.

And so we look at those types of things to wear it allowed us to kind of step back and and.

And we retool things, because we had to because of COVID-19, but actually seeing the success.

And we also had a new patient promotion that we ran in the middle of the summer, which which garnered a lot of which garnered a lot of interest so.

And where do we bring that type of promotion back in the 2021 cycle. So those are ongoing discussions, but those are two kind of concrete examples where.

Things that we had to change because of Covid may result in and some lasting impression.

Great. Thank you very much thanks.

Thanks, a lot and thank you Linda and thank you and our next question comes from Brooks O'neil from Lake Street Capital markets. Your line is now open hi.

Guys. Congratulations on the continued terrific performance.

And I'm going to do the unthinkable and ask you one and only one question.

Can you just talk a little bit about what you see as the primary challenges.

Two accelerating company store growth and how you.

Plan to deal with those challenges thanks a lot.

Sure. Thanks, Brooks and we appreciate it.

Yeah.

If you think about the numbers, we added four corporate clinics last year and we've now guided to between 20 and 30.

So that will not come without some unique challenges and we've had to step back and think through the resources.

So the one thing that we won't do is be under resource as we try to navigate that level of growth and so we've redesigned our outside the four wall kind of field overhead structure to allow us to scale and we're actually looking at new markets traditionally we've been.

And more of an infill type strategy as it relates to greenfield growth trying to cluster that around.

Existing infrastructure, but we're going to embark and some new territory and 2021, so we need to think through that as well, but really its the pace and the geography that come to mind. So I think thats right, Jay and I think what's really nice brooks's, we've learned a lot.

And the first time, where this company has tried to accelerate growth of its corporate units.

We obviously started that back in 15, and 16 and learned some painful lessons, but guess what we learned those lessons and I think as Jacobs, saying that we're being very thoughtful and making sure that as we go forward and accelerate the growth of our greenfield that they were going to make sure that as that is resource appropriately.

Always the same limitations or concerns and just whether it's a franchise or a corporate clinic are there enough doctors are.

Are there good sites are we going and we're getting a good sites at a price and makes sense for our model and.

So that we have the normal issues, though and face any fast growing company and a small box retail environment, but we feel we have a remarkably talented team who can really make sure that we arent stumbling too hard and learning from our mistakes and and are able to achieve the goals that were set out for ourselves.

And that going up and saying, we're going off and of 1000 units is a big goal and it's going to require everybody and this company focus on making sure we achieve it and our franchisees and our regional developers and our Doctor. So there's a lot of pieces moving there, but we feel that we absolutely can get there.

Fantastic, Thanks, a lot and keep up all the great work.

And thank you very much.

And our next question comes from Jeremy Hamblin from Craig Hallum Capital.

Your line is now open.

Thanks, guys I'll add my congratulations on a truly impressive year really in any environment, but let alone COVID-19.

I wanted to just follow up on the development.

Company operated clinics. The first question is.

Can you provide some capex guidance for 2021 and number two is whether or not you've seen any changes around anticipate any changes in terms of the cost per new unit kind of the upstart cost of the company operating clinics and what you expect for cash.

The four wall.

Los <unk> and <unk>.

Sure Juan.

Sure.

First part of the question was around cash Capex.

Capex guidance again, we havent provided any forward looking information, but we can do some back of the napkin calculations again, we've guided to expand that portfolio by 20% to 30 units and Youre looking at a build out cost of around 180000 to little over 200000, maybe and some of the more expense.

Debt markets. So however, many greenfields, you're estimating that would be your kind of capex investment at the Greenfield level. In addition to that Opportunistically, we do look at acquiring franchise units back the.

The Capex investment would be based on valuation and the stronger performing unit would warrant.

Higher investment dollar amount, but it is hard to estimate those and then lastly, we're continuing to rollout the access project and with that comes a lot of capitalized expenditures in the form of that project. So those are going to be your largest buckets again, we haven't provided a number on that.

But thats kind of some of the larger drivers of Capex.

In 2021, the largest of which being those greenfield units coming on board.

The second part of your question.

And.

Was ultimately asking about the four wall impact I think the simplest way to think about that as we have those greenfield units come through.

Really.

If they are riding out through the through the early part we talk about our time to breakeven. So you've got your Capex investment and you've got those working capital losses. So we said that the units are breaking even and somewhere in that six to nine month timeframe and so.

And as you begin to ramp while we have improved the grand opening process and we've improved on that growth that time to breakeven you still have working capital losses, you've got Grand opening marketing costs, you've got to hire and train a doctor before you have your doors open so and its simplest form you are looking at probably a 100000 of loss on an adjusted EBITDA.

<unk> for each one of those greenfields as youre kind of working through all those upfront costs.

And so thats kind of a simplified way to think through that.

I know there was a third question of snuck in there and that was really what what's the trends moving in terms of build out costs and.

And I'd say that we're seeing some trends a little bit change by market. So for example, and California as Jack was referencing were seeing cost from the overall build out higher than for example from the other markets like Arizona.

I think everybody is kind of anticipating that we should be seeing some softness and the real estate side of this which is a significant cost associated with the build out with the operating of these clinics.

I'm not going to say, we've seen a lot of that because the type of units are the locations. We're going into are still about a one small box retail space and theres still a lot of competition around that and Theres certainly a lot of units out. There then and developments that are that are struggling and losing their anchor and not give you that but we don't want to be there either so I think that.

We are continuing value engineering, and the actual build out cost itself and looking at ways that we can reduce the cost and still maintain the quality of our buildup.

And so it's kind of a I think that as a trend we would we're not except for in specific markets like California, and we're expecting the overall cost to kind.

Stay relatively flat and we will still watch what's going on with the real estate.

Great and kind of related to the Capex question that you were you were getting into the investments and access and this is part of where I was going.

In terms of thinking about that and.

Investment, which I wanted to see if you had a sense of whether you expect the implementation of that system to result, and a bump in your average revenue per location per.

One quick question part two is whether or not.

You would potentially take a higher.

Charged from franchisees.

Once that systems in place.

Sure. The first part is would we expect to bump. So I think the important part is to realize that first we're moving from.

Antiquated kind of homegrown proprietary platform and we're moving to a third party SaaS application with the initial phase of that rolled out kind of what we categorize as what's called a lift and shift right, bringing all of that existing functionality onto the new CRM platform and.

And so we're not going to have that rolled out until the summertime. So.

If the initial phases of lift and shift it's really the second phase, where I think youre going to see those increases on the top line and those will be driven by the implementation of marketing automation tools, our patient portal.

Mobile check in and with our mobile App all those types of things that'll be functionality and a secondary phase of the project those will be the incremental drivers of the topline revenue. So I don't think 'twenty 'twenty, one and we'll see that immediate lift.

Jack I couldnt be more and just because we know right now is the essential thing is to do this lift and shift to get off this homegrown platform to a world class platform that we can really unleash the power of the information that resides in our system, but and the beginning.

And that's going to come down the road and that's why we're making that investment but right now.

It's just the lift and shift is taking what we currently have and putting in a format that we can then use.

The real power of that CRM.

Model that ultimately Jake was referencing the different opportunities and.

And then the second part Jamie was do we expect to to charge more for the fees, we do not and those are all outlined and their respective franchise agreements. We did go through and ITC increase.

And then 2019 timeframe and.

And really tried to be anticipatory understanding that there is a greater technology cost there is a cost to innovate and we have to keep up on a technology front. So we tried to be proactive with that and we worked through that with our franchise base, but we do not anticipate.

And any increases in the near term.

It sounds like a great opportunity for 'twenty two last question from me.

In terms of thinking about your customer base and the stickiness of your customer base.

If you were to flashback to your customers your customer base from a year ago, what percentage of those customers have come in for an adjustment in the past three months do you happen to have like a range that you'd be able to share with us.

All of that.

And.

Let me make sure I'm understanding the question can you rephrase the question, Jeremy how many of our customers and an and.

Yes. So if you were to flashback to your customers that came into joint location in Q4 of 2019.

And what percentage of those customers came back for at least one visit let's say in Q4 2020.

It's going to be more anecdotal, Jeremy and then actually having the data and when we look at the data historically, what we would tell you is that because you got to look at this and a couple of different ways is that when and one of the comments and we made and this and our initial remarks is and in 2020, we saw a significant increase and the total number of memberships and as a percentage of sales of <unk>.

And then compared to 2019.

So in 2019 and was roughly 80% of ourselves where our membership and in 2020. It was 85%. So what that's telling you is that we have those and those patients that are coming in and are in fact, staying on as a member longer.

And so I'd say, that's increasing if.

If we look at 2020 the metric most impacted negatively negatively by the pandemic was our new patient counts.

And that kind of makes sense to me because what we're seeing is that if you're if you're in the middle of a pandemic and your and pain and you don't want to go out there because you are really.

Rightfully felt concern is that.

You've got to be and a lot of pain to be able to be opening that door to join to a car practic clinic for the first time.

What we've also done is those clinics, who actually do make that journey are converting and join him as a member at a higher rate than we've ever seen and the history of the company.

So and the metrics that I would also tell you is that we're seeing because we have really to make three major metrics that we're looking at is one and we would say new members and secondly, we look at conversion and how many of those converted to a membership and then third what's our attrition rate how many drop out.

And I would say that we've seen during the 2020 as our attrition rate actually has has flattened or improved its overall system. So we're seeing people stay with us were seeing people convert faster and the biggest challenge. We're seeing is just getting those new patients and the door. We found a lot of successes Jack was referencing earlier about the promotion and the summer will.

Good day, and a free adjustment for any new patient.

Is that something that we see some some opportunities going forward absolutely.

But I would say that and the more broader term and as our existing patient base and stickier to us.

And we need to continue to focus on bringing those new patients and for the first time.

Great. Thanks, guys.

Hi, guys.

Fantastic great job. Thank.

Thank you. Thank you.

And our next question comes from Michaels and Bran from Roth Capital. Your line is now open.

Hello, everyone and this is Michael <unk> from Roth capital on for Dave Ben Thanks for taking my questions. I just have two for you. So as we roll forward our model a few years. The company begins to accumulate a fair amount of cash with almost no leverage assuming you keep the same balance of corporate owned clinics versus franchise is there a longer term thought on the return of capital to shareholders.

And.

Yes, it's a highly cash flow generative model and you can see and 2020, we did over $2 million and operational cash flow.

On.

Our balance of call. It 500, something units so as you roll that number forward.

There is a lot of cash flow.

Opportunity and those out years, what I will tell you is that right now we have a very clear strategic plan to increase our our scale and our size and so right now all the investing activities that youll see youll be in the form of growth and supporting that growth and our infrastructure at some point and the future. We will have to make those decisions, but right now we're <unk>.

Very focused on increasing the unit count reaching that goal of a 1000 units by the end of 2023.

And then we will.

Take care of some of those additional cash issues a little bit later down the line.

Great. Thank you.

Last one are there any updates regarding store within a store concepts and particularly as we exit COVID-19 and benefit from the more traditional retail foot traffic and can we get a sense as to the Capex and return dynamic differences versus the traditional store opening economics.

I'm going to answer the second part of your question first and the answer is we don't have the data to answer that question.

We've had very limited joint store concept. So when we're talking about actuals, we've had one which was we put a joint and existing concept call Relaxer back and then we had a second one where we took the joint and put it in.

And the airport inside of express spot.

I would tell you the one clinic debt.

And closed there's still close independent and <unk> is in fact, and the airport and Austin, Texas and.

So we have very limited experience in terms of what is the true economic difference of performance of these disease.

Nontraditional growth versus our traditional clinic.

I would say that we do see this as an area of.

Great opportunities you can kind of just expand what does that look like whether it's a military base or whether it's a large chain of retail concepts out there that has room to put it.

A small joint inside their business I think that there is huge opportunity to explore.

We're still primarily focused on the core of our primary over traditional clinic.

But we absolutely will continue.

Continue to invest and look at these other opportunities as we go forward.

Thank you guys.

Thank you.

And our next question comes from Anthony Vendetti Maxim Your line is now open.

Thanks.

Just two questions one on the marketing campaign, what's the expected ramp and and the dollars and and how should how should we look at.

How those dollars will be spent and then I just have a follow up on the clinics.

Yes. So when you think you think through marketing.

You will see an increase and scale.

In terms of.

Keeping in mind that 2% of all growth sales go into our National marketing fund so as our gross sales continue to scale, our national marketing fund will scale with it because it's a percentage of those sales and so with those increased dollars.

And those will be used on on national and regional campaigns and it'll be focused largely in the areas that we have those dollars channel to now and Theres a great deal of it heading into the digital space and we just mentioned and the script that we will continue to rollout our new national AD campaign, and growing and sophistication. So we would expect those to scale the other way.

Youre going to see sales and marketing dollars scale.

And with clinic growth, specifically and our corporate clinics. So as we add corporate clinics, we have a kind of a per months.

Per clinic spends that we have so youll see those two lines continue to increase and the year. So as we look at how that Leverages the national marketing fund scales.

Directly with our growth sales and we're always mindful in terms of the per clinic spend on the corporate basis to make sure that we're getting the biggest bang for our bus. There. So you will see that dollar pool increase in size, but we're always focused on leverage as well.

Okay, and then just lastly, if I if I go back I guess three or four years ago. There was a thought that maybe if you got to 1700 800, or so clinic that and certain markets you would start to hit hit saturation is that book.

A number you think it is.

And sort of the plateau.

Number in terms of total number of new clinics, where you start to hit saturation and some markets or has that number been adjusted as.

As you've looked at how the markets have evolved since then.

I would say absolutely and is dependent upon.

And how the market continues to grow Anthony that if you look at that and some.

Some of the stats and we just gave okay. When we first day that survey or is this your first time to ever see a car factor it was 13%.

Last year it was 27% so what we're doing is not just simply taking market share what we're doing and building market. When you go back to where that 800 number came from and that wasn't just okay. If there is 41000 practitioners out there I mean why can't we do 800 as of what we did is take this incredible database, we have of our patients and looked at the demographic and psychographic elements of where our current footprint.

And then went out and said, okay, how many new and just how many additional points of distribution replicate that footprint and that is where that eight 500 plus tons from what's interesting is we've seen and some of our more dense markets like here in Arizona, we have and as franchisees are literally splitting their own protected territory, adding and clinic and.

And increasing the value of both of those very very quickly.

And so we're seeing some self cannibalization because again the market itself is expanding and so quickly as we bring these joint into that market. So.

What is the what does the top of how many units we can have and this country.

It's a great question I think it will continue to expand over time as we watch the market expand and you can create more and more density as it relates to this concept.

Okay very helpful. Thanks.

Thanks very much.

Thank you thank you and.

I would now like to turn the call back over to Peter Holt CEO for closing remarks.

Thank you very much Justin.

Thank you all for your time today and as a note and we plan to participate virtually later this month and the da Davidson growth and consumer conference and the Roth Annual conference.

And we've heard so many patient stores, we lay and their personal stories on how the joint has helped them during the pandemic and I wanted to just share a couple of them with you.

And ICEE ICU nurse from Arizona wrote and I.

Covid hit us hard and really took a toll and my bad my patients are typically on a ventilator and to data, meaning they don't move on their own they require a lot of attorney which can take a toll on your back that's why I started seen car Practic care. It's made my mobility, so much better over the last couple of months and I will continue to grow.

A breast cancer survivor, and a yoga instructor from Texas reported seeing my Doctor. Once a week is help me and maintain the release and balance I need to fill and my spine.

Their visits, especially during Covid has been a light and I'm, so grateful for the service and attention and that I get from every adjustment.

And finally, a COVID-19 long haul up from Nevada noted our contracted COVID-19, and March 2020, and had been suffering and ever since with severe pain care and my entire rib cage Stern and Bakken net this pain and radiate from my head and all over which is quite debilitating.

During and intense flare ups my shortness of breath will completely not me and im unable to work or even go up the stairs and my home and friend recommended I'll try the joint and I Couldnt be happier my weekly visits enabled with doctor to assess mimo and <unk>.

<unk> and <unk> and work everything out gently and comfortably and so grateful for my Doctor and a joint I've not had a headache and we've now been able to work continuously without having to take off since I've joined the joint.

Thank you all day, while adjusted.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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Ladies and gentlemen, thank you for standing by and welcome to the Joint Corp, Q4, 2020 financial results Conference call. At this time all participant lines are in a listen only mode.

And so to speak this presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised and today's conference is being recorded if you require any further assistance. Please press star zero.

And I'd like to hand, the conference over to your speaker today Bryan Shelton.

HP Investor Relations. Thank you. Please go ahead Madam.

Thank you Jessica good afternoon, everyone. This is moriah shilton of <unk>.

Investor Relations.

On the call today, President and CEO, Peter Holt will review, our year end and fourth quarter 2020 performance metrics and provide an update on the business.

CFO, Jake Singleton will detail our financial results.

And then Peter will close with a summary, and open the call for questions. Please.

Please note we are using a slide presentation that can be found at IR.

And that the joint Dot com forward slash events.

Today after the close and the market the joint Corp issued its financial results for the year and quarter ended December 31 2020.

If you did not already have a copy of this press release it can be found and 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 performance.

<unk> and plans and objectives of management.

Throughout today's discussion we will present, some important factors relating to our business.

Could affect these forward looking statements.

Factors that could contribute to these differences include but are not limited to.

And the continuing impact of the COVID-19 outbreak and the economy and our operations.

Including temporary clinic closure and business hours and reduced patient demand.

And 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.

And the other factors described and risk factors and our annual report on form 10-K as filed with the SEC for the year ended December 31st 2019 and.

And the updated for any material changes described and any subsequently filed quarterly reports on form 10-Q.

And there may be revised or updated and our subsequent filings.

We anticipate filing our December 31, 2020 10-K on March 5th.

As a result, we caution you against placing undue reliance on these forward looking statements and I 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.

And finally, we are not obligating ourselves to revise and results are publicly released 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 and GAAP measures Omar.

A reconciliation of net income to EBITDA and adjusted EBITDA is presented and 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.

And it is my pleasure to turn the call over to Peter Ho.

Thank you, Brian and welcome everybody to the call and I'm delighted to speak with you today to review, our Companys performance and a year like no other.

Our operational successes managing the impact of the pandemic on our business supported by our clinic staff treating our patients throughout this unpredictable environment resulted in a strong financial performance and further validates the opportunity before us.

I've said, it before and reflecting upon 2020 and I do so now today I am so grateful for our entire system, our doctors wellness coordinators franchisees regional developers corporate staff for their dedication to our mission of improving quality of life of our patients.

And this pandemic has shown car practic care truly as an essential health care service to our patients.

The joint is revolutionizing access to car Practic care.

Located and convenient retail settings, we provide concierge style membership based services without the need for insurance or appointments with attractive pricing and convenient hours.

Our growth strategy is to build our brand increase awareness of the efficacy of car practic care attract new patients and open more clinics.

We're already the largest most recognizable provider of car practic care and the country.

Given the high level of fragmentation of the car Practic industry, we have a significant opportunity to continue to increase our market share as we redefine and expand the market itself.

Our concept has remained steadfast and adapting to the pandemic. The primary change we've made to our operational practices was to increase standardization and cleanliness procedures.

This compares favorably to many other retail concepts that needed to reinvent their business models just to survive.

While we experienced that initial negative financial impact and the second quarter of 2020, our resilient business model and the effective crisis management enabled us to quickly rebound.

During the year once again, we increased our productivity, resulting in improved credit performance and greater company profitability.

As a result, our adjusted EBITDA positive for the third consecutive year exceeded our plan and further strengthened our Foundation Foundation.

With our growth momentum reignited, we're optimistic about 2021.

Turning to slide four I'll review the performance metrics for the full year of 2020.

The total number of adjustments to perform during the year reached $8 3 million up from $7 $7 million and 2019.

The total number of unique patients treated reached $1 1 million up from 998000 and 2019.

584000 patients open the door to the joint for the very first time relatively flat compared to the 585002 thousand 19.

27% of our new patients had never been to a chiropractor before up from 26% and 2019.

85% of the system wide gross sales came from monthly memberships up from 80% and 2019.

We opened 70, new franchise clinics nearly equal to the 71, new franchise clinics opened in 2019.

And we sold 121 franchise licenses pretty darn close to the 126 sold in 2019.

We believe that achieving this level of performance and the 2020 environment is a powerful indicator of the positive long term outlook for our business.

Turning to slide five well Jake will discuss our financial results in greater detail in a moment I'll provide highlights to our strong fourth quarter results.

System wide sales increased 24% compared to fourth quarter last year.

Our comp sales for clinics that have been opened for at least 13 full months grew 16% compared to the same period of 2019.

Revenue grew 23% compared to fourth quarter 2019, bringing the full year revenue to $58 7 million.

Adjusted EBITDA increased to $3 $7 million, TARP, and Q3, 2020, and making it the strongest quarter and the Companys history.

Full year 2020, adjusted EBITDA rose to $9 1 million up 47% from 2019 and.

As of December 31, and 2020, our unrestricted cash reached $26 million compared to the $18 3 million at September 32020, driven primarily from an increase and cash flow from operations.

Turning to slide six let's review our portfolio.

During the fourth quarter, we opened up 21, new franchise clinics and no greenfields slightly off the pace from the 25 opened in Q4 2019, which is one of our most active quarters and clinic openings and our history.

Also during the quarter, we closed two franchise clinics and acquired one franchise clinics.

For the full year 2020, we opened 70 franchise clinics and three greenfields compared to 71 franchised and five greenfield clinics and 2019.

While our pre COVID-19 guidance for the year was originally hire for franchise openings, we believe a flat number of openings and in this environment as a win.

And 2020, we've closed seven franchise clinics and acquired one franchise clinic compared to the foreclosures and <unk> acquisitions and 2019 despite.

Despite the pandemic, we continue to experience and unusually low closure rate of one 2% and 2020.

At December 31, 2020, we had 579 clinics and operations consisting of 515 franchise clinics and 64 company owned or managed clinics, maintaining and mix of 89% franchise and a 11% corporate.

A year and we had 253 franchise agreements and some level of development. This compares to the 204 at December 31, 2019, and is reflective of the increased interest and our franchise system.

Turning to slide seven and the fourth quarter 2020 per year of the pandemic, we achieved the highest number of quarterly franchise license sales as a public company.

We sold 56 up from 30, and the third quarter, and 23% and fourth quarter 2019 for.

For the full year 2020, we sold 121, new franchise licenses only a handful left from the previous annual high set last year at 126 licenses sold.

And frankly for any franchise system to be selling licenses and a business climate is exceptional and we're proud of our sales team and their dedication to attracting great franchise candidates.

Frequently I comment that franchising is a nationwide brand building exercise and a small box retail environment. Our storefronts are most effective way to build our brand and.

And we have and will continue to use regional developers, our rds to extend our reach and accelerate our brand building, particularly in new markets they've been integral to our franchise sales growth since 2017, they've been responsible for 81% of our franchise sales.

With our DS we entered into a 10 year agreements to sell and support a minimum number of franchise clinics and their territory and can negotiate extensions to that territory as appropriate.

And typically the minimum development schedule is frontloaded when.

When markets reach maturity, it's not unusual for the franchise or to repurchase the Rd rights and <unk>.

And we did so and two well run mature markets nor.

North Carolina on December 31, 2020, and Georgia on January one 2020 one.

These transactions totaled $2 $4 million.

As a result, 69 franchised clinics and 37 signed franchise license agreements were unopened and clinics shifted from management by our DS to corporate management.

Thereby eliminating the payments made to these rds for franchise sales commissions and royalties of 3% on the gross sales for their clinics.

The transactions are immediately accretive and expand our margin contribution.

At December 31, 2020, 419 of our clinics or 72% were supported by our 22, our DS, which covered 61% of the metropolitan statistical areas or Msas at December 31, 2020.

On January one 2020, one we reduced that to 378 or 65% of our clinics that were supported now by 20 <unk>.

We will continue to evaluate new Rd opportunities.

Recently, we expanded the R&D for the Wisconsin region to include a portion of Michigan.

Today, our aggregate 10 year minimum development schedule is for art for Rd territories established since 2017 comes to 475 clinics.

And this large foundation of clinic commitment bodes well for our continued clinic expansion and sales growth.

We're expand we're investing and the future and plan to expand our entire portfolio between franchise and corporate units well over 100 units and 2021, our strong license sales set the stage for increased future franchise clinic openings as we remain committed to achieving our goal of opening 1000 clinics by the end of 2020, three resulting and increased revenue.

Scale and brand recognition.

Turning to slide eight let's review our franchise system for a moment.

Strengthening our franchisee relationship is a long standing priority for the joint and I'm pleased to report that we continued to make positive inroads.

According to franchise business review and independent organization, we've engaged the conductor of franchisee satisfaction surveys. Most recently in 2000 and October 2020, the joint has achieved a franchise satisfaction index or Ssi of 75%.

This is up from 65% in November of 2018, and 58% and April 17.

And emphasize score represents the weighted sum a positive responses and discounts the negative responses.

And <unk> ratings allow a franchise or a benchmark their franchisee satisfaction and against various industry sectors. We.

We scored in the top tier validating our continued efforts to improve our relationships with our franchisees.

Turning to slide nine, let's turn our attention and marketing.

And Q4, we launched our annual holiday promotions are black Friday package sale, and our year and membership promotion.

With our clinic teams highly engaged and are.

And using our best promotional best practices resulted in both promotions exceeding our previous records.

Black Friday sales per clinic were up 98% over prior year.

And our year end sales per clinic grew 42% over prior year clear.

Clearly our patients responded enthusiastically to these limited time and opportunities to save even more on car Practic care.

Sales growth and clinic expansion or increase the flow of dollars into our national marketing fund and.

And we're using these resources to invest and new strategic partnerships to fuel our growth and.

And 2020, we began working with a new public relations firm to build a national profile and grow awareness of car Practic.

And 2021, we've launched two new additional partnerships with media and creative agencies to elevate our brand advertising and we look forward to releasing a new national campaign in Q2 of this year.

And 2013. This number was only 14% nearly doubling our first time users demonstrates the joint growing ability to reach and increasing number of American consumers, who have yet to benefit from chiropractic care.

Turning to slide 10, and this review access to our new it platform.

Access is our most important initiative in 2021.

It will provide an improved point of purchase system financial systems business intelligence marketing automation and patient feedback capabilities. Among many other features.

And Q2 2020, we had to pause our efforts to implement axis to focus on helping our franchise community respond to the impact of the pandemic.

It is essential that that new platform be fully tested and every franchisees prepared and trained for the acceptance of the new system.

As we complete this crucial crucial project, we will not jeopardize that by rushing or shortcut and the process to meter and artificial timeline.

Currently we plan to begin a formal rollout in early summer.

And with that Jake I'll turn it over to you.

Thank you Peter.

Turning to slide 11, and comparing the fourth quarter 2020 to fourth quarter 2019.

System wide sales for all clinics opened for any amount of time increased to $77 6 million up 24% year over year.

System wide comp sales for all clinics opened 13 months or more were 16% compared to 26% and the prior year.

System wide comp sales for mature clinics opened 48 months or more or 10% compared to 19% and the prior year revenue.

<unk> revenue was $17 million up $3 2 million or 23%.

Company owned or managed clinics contributed revenue of $9 2 million, increasing 22% from the same period a year ago.

Franchised operations contributed $7 8 million up 24% compared to the same period last year.

Increased revenue from both categories is due to the greater number of clinics and continued organic growth.

Cost of revenues was $1 9 million up 19% over the same period last year, reflecting the increase and franchises, resulting in higher regional developer royalties and commissions.

Selling and marketing expenses were $2 1 million up 15% over the same period last year.

Collecting the timing of the advertising spend and the fourth quarter.

General and administrative expenses were $9 5 million compared to $8 5 million.

The $1 million increase was primarily due to higher payroll and related expenses to support revenue growth into greater number of clinics.

We had record operating income of $2 8 million compared to $1 3.002 million 19.

We recorded a net tax benefit of $7 9 million compared to a tax expense of 33000 in 2019.

This was driven by the reversal of the valuation allowance on our deferred tax assets of $8 $9 million.

We delivered record total adjusted EBITDA of $3 7 million.

Which increased 74% compared to the same period last year.

Franchise clinic, adjusted EBITDA increased 23% to $3 8 million.

Company owned or managed clinic, adjusted EBITDA increased 49% to $2 5 million.

Corporate expense is a component of adjusted EBITDA decreased 1% to $2 6 million, reflecting our cost control efforts.

Turning to slide 12.

I will now compare the full year 2020 to 2019.

Gross sales for all clinics opened for any amount of time grew 18% to $260 million.

System wide comp sales for all clinics opened 13 months or more increased 9% and significantly system wide comp sales for mature clinics opened 48 months or more which now represent 352 clinics increased 5%, which is remarkable and todays retail environment.

Revenue increased by 21% to $58 7 million meeting our guidance.

Operating income was $5 5 million compared to $3 $4 million and 2019.

Adjusted EBITDA increased 47% to $9 1 million exceeding our guidance.

At December 31, 2020, we had $26 million of unrestricted cash and this compares to $8 5 million at December 31 2019.

During the year cash inflows from operating activities were $11 $2 million cash.

Subsequent to year and the company repaid the PPP loan of $2 7 million, which will be reflected on our March 31, 2021 balance sheet.

On to slide 13 to review guidance.

For 2020 for 2021, we expect revenue to be between 73 and $77 million compared.

Compared to $58 $7 million and 2020.

Adjusted EBITDA to be between 10, five and $12 million compared to $9 1.002 million 20.

Franchise clinic openings to be between 80, and $100 compared to 70 and 2020 and.

And company owned and managed clinics through a combination of both greenfields and acquisitions to increase between 20 and 30 compared to four and 2020.

Following our strategic plan, we expect the majority of these to be Greenfields and this will be complemented by acquisitions, which continue to be opportunistic.

There is pent up demand that will fuel openings in 2021, and this is evidenced by the 253 franchise licenses and development at the end of 2020.

We're investing and our future and expect the entire portfolio of clinics to increased by over 100 units. Therefore, we continue to believe we will achieve our goal of opening 1000 clinics by the end of 2023.

I will turn the call back over to you Peter.

Thanks Jake.

And just said, we are investing and our future and our drive to 1000 clinics and we believe this is just the first milestone of many as we bring car practic care into the mainstream.

Looking at our long term potential we are a first mover advantage that will continue to leverage to create additional opportunities for expanded growth. For example, we can evaluate potential extensions such as ancillary products and services expand and non traditional settings, including military bases, our store and store concepts and finally international expansion and those markets that are already have a strong.

Car Practic acceptance.

It is important to understand what are the todays driver of market drivers that fuel our growth.

First there's a great opportunity to capture more market share at <unk> $90 billion has been annually and the United States on back pain and of that $16 billion expense, specifically on chiropractic care.

Next the fragmented market of approximately 41000 practitioners yields opportunity to gain market share as the power of our size create synergies and marketing operations and <unk>.

Finally, our specific business model continues to expand faster when compared to the car practic market as a whole.

And by making car Practic care available to a broader consumer market and and necessity will and convenient retail setting, we're revolutionizing access and demonstrating the power and efficacy of car Practic care, which results in attracting new clients.

As mentioned in 2020, 27% of our patients were new to car Practic they'd never visited before they visited the joint they've never seen a chiropractor.

We're not just taking existing market share, but most importantly, we're expanding the market.

This is why we significantly outpaced our industry, while the car Practic care market is expected to grow at a $1 four a CAGR over the next five years, the joint delivered a 10 year CAGR of 70%.

Our rapid growth as illustrated by our four year stock comp sales, even with the pandemic, which was now a remarkable 80%.

Our strong strong performance has been recognized.

Recently, the joint was named or increased its ranking on three important lists.

And the Forbes 2021, Americas Best small companies list named a joint number 13 out of 100 companies that have market values between $300 million and 2 billion positive sales growth over the last 12 months and a share price of at least $5.

The franchise times fast and serious list 2021 evaluated the smartest growing franchise brands with a joint moving up number 17 of 17 spots compared to last year's ranking and the.

The franchise times created a formula to identify fast growing franchise systems that have the staying power as an antidote to multiple other rankings that include too many one year wonders.

And finally entrepreneur is 2021 franchise 500 move the joint up 'twenty spot compared to last year's rankings and number 58.

The key factors and entrepreneurs evaluation and crude costs and fees size and growth support brand strength and financial strength and stability.

Once again I'd like to close by expressing my deepest appreciation to all of the car Practic team. The joint Chiropractic teams who've continued to Selflessly served during this pandemic their dedication to our mission is humbling it's.

Remarkable that in 2020, we delivered the performance, we did including record breaking quarterly franchise license sales and record annual adjusted EBITDA.

To our franchise community, our Rds, our corporate team and the joint colleagues across the country I. Thank you.

You are truly making a difference and all the lives that you touch.

Justin and I am ready to begin the Q&A.

Hi, everyone first let me say congratulations on a terrific year despite COVID-19.

How business could trend as the U S does fully reopened.

And the pandemic stage and then I guess, how how are you thinking about.

Kind of the pandemic fading into the rearview mirror.

Given that you added a lot of new customers.

That were due to Cairo care do you think that might accelerate as the pandemic share phage.

Hey, Jeff. Thank you for the congrats and great questions and to give a little color on the <unk>.

And have a regional impact of the pandemic as we look across the country.

And I think what I'm most struck by is we.

And have not seen any real clear geographical impacts where the market's open and we've talked about this and earlier calls.

We're looking at comps and Ah.

California compared to the Texas markets of the Florida market is that there is nothing that really stands out other than perhaps Colorado, where we have had a significant situation where with the directive of the Colorado Governor is that our clinics were closed there for 37 day. They were allowed to reopen but they now have to take appointments as opposed to walk in.

And so theres still some impact there but outside of the.

An example, like that what we've been seeing is really a consistent performance across the country.

We get to this new normal when the pandemic is over I.

I would say is that this really ties to our whole plan of that what we're doing is true introducing people to the power and efficacy of chiropractic and what we find is when people do come in they use those services for the first time, they come back and you see that and our comps you see that and our growth how.

How do we choose our medical services through referrals and so you had a great experience with a clear approach and you tell your friends and family who are and pain. We know pain is only increasing in this country and we also know that people are less and less enthusiastic about using opioids or and or surgery as a way to address that pain. So.

Okay great.

And then if I could squeeze in one more here just just wondering latest trends that youre seeing around chiropractors operating independently those independent practitioners.

Well I think in terms of any real trends on the independent practitioners, which defines the industry is it's more anecdotal and I know that like any of these independently fragmented markets, whether it is and car practic her hair care, our frozen dessert is that trying to operate and a pen.

And then <unk> environment by yourself is incredibly difficult.

And I think that one of the reasons that we've been so effective and our and our response to the pandemic is because of the power of working as a team with our franchisees collectively working together sharing experiencing.

Pulling dollars and co ops across the country to educate consumers about about the joint and so it's hard to imagine how so many of those are you seen any business is all over the country that are closed and probably won't open, especially and the <unk> industry and I think our practice has been equally impacted by it but I don't have a study or actual data.

Other than more anecdotal to tell you.

What the exact number is but what we all know it is just really tough to be out there. If you don't have some kind of support and this kind of environment.

And I think as we as.

As you are touching upon the status of doctors. There is no question. This is essential for our growth is that we have a very simple model and it rests on our doctors and.

And I would say is that we have seen and increasing number of doctors.

And work for US are included or are interested in buying and franchise from us and so I think part of that is the pressure that's on the overall industry and that we are continually.

Improving and opportunity for them to find a secure and safe place to work and so I would expect that to continue I will tell you that is absolutely a strategic initiative on our part is to continue to improve our ability to attract and retain doctors that the heart of our organization.

Okay and overall do you feel like you know when you think about all those things do you feel like the quality of the doctors you are attracting is improving.

I do I think we can we are not done I think we can continue to make inroads we spend a lot of time on working with our doctors and.

And helping them to truly understand our business model and how to be more effective and patient care.

I'm not a doctor and car Practic I can't tell doctors, how to practice, but we can certainly share with them.

And the best practices associated with working in a clinic and our and our and our business model and that's what we focus on and that of course, our operators a doctor.

Okay, good to hear and thanks for taking my questions I'll take the rest offline.

And thank you and our next question comes from Linda Bolton Weiser from D. A Davidson your line is now open.

Hi, congratulations on great results.

So I was curious.

And looking at your long term target for 1000 clinics going out.

A couple of years debt.

And that would average out to at least having to open 140 per year and so your guidance for 100 to 130, new clinics in 2021 and slightly below that so is that because this is just the period immediately following COVID-19 and you expect the number to ramp even more in 2010.

Two and 2023 or are you just kind of being conservative and the guidance that you're giving.

And then great to talk with you and thank you for that question and I would say is that Youre absolutely right. When you do the math, we've got to be opening up a 140 clinics and the next three years to hit the 1000.

What I would tell you is and <unk>.

Other franchise systems, where I've seen this is debt that you. When you are really working with the concept that has legs and it has a market that is only increasing as you really do see that acceleration from year over year over year. So I wouldn't expect our growth to be linear and the sense. Okay take the those numbers divide by three and say 140.

We just said and we're expecting to open up over 100 units in 2021.

I'd expect that to be increasing as a percentage and total number of units opened in 'twenty, two and further increasing in 2023 to get to that 1000 units.

We're not arguing that it's going to be a lot of work to get to a 1000 units.

Strong goal that we're sitting here with 579 unit and so we know we have a lot of work in front of us, but I think that we have a contract that's only becoming more relevant to the consumer we have and our D system, that's only actively more.

Zestful in there and their performance we have a concept that's attracting more and more sophisticated franchisees and that as you get and it's kind of interesting and a franchise model that Youre best franchise candidates typically come from your own clinics or your own stores. Your customers' day, they're in love with the concept. So much not only do you like the service and product they want to buy.

That franchise and so as you open more clinics you have more of those high quality leads and leads to close so I think that there is a momentum that builds up and I believe obviously, we believe that we're going to be able to accomplish that or we would pull back on that goal.

Great. Thanks, and then can you.

Given that you expect such a pickup and greenfield openings and 2021 can you kind of remind us about what the capital expenditure is per Greenfield clinic, and then do you have a.

Our capex guidance.

For 2021.

And economics perspective, typically the buildout cost and again, we're targeting square footage and the range of a 1000 to 200 square feet. The Buildout cost is relatively simple and we would estimate that to be around 180000, depending on your market, California markets might be a little bit more for example.

But thats kind of your build out costs and then you've got some working capital losses as they march through that time to breakeven.

Great. Thanks, and then.

Does your guidance for 2021 baked in a certain same store sales growth number that you could share with us.

We havent provided that we.

We do expect continued organic growth.

<unk>.

And when you look at the overall range is the top end of that range is a 30% increase on the top line and that'll be a complement of both unit growth and organic growth, but we haven't specifically broke out the comp figure of debt.

Okay and just finally.

Given the challenges of the Covid year.

And having to slightly change your operating procedures and the clinics is there anything about COVID-19 that.

Actually kind of gave you new learnings at the clinic level debt.

That you think will actually help your operating procedures on a kind of permanent basis going forward.

I think absolutely and then.

And it really applies to all levels of our business not just in the clinic.

And our clinic level itself I think these enhanced standardization and cleaners procedures are a really powerful and it will continue to utilize them now right. Now we are acquiring the entire system if you're in our clinic, we're not dependent on the jurisdictions and the state we're not requiring patients to be and I'm, asking if the jurisdiction and they're operating and doesn't but.

And we do require regardless of what the local or state and the directors are to all of our doctors and weldon's quarters to use them as do.

Do I expect that to continue on going forward no.

I think though.

We would love to get away from that but I think that there are in fact other procedures that are really focused on the cleanliness and the standardization that will continue to use for the rest of the business I think on.

And if we pull up a little bit can just look at the whole way in which a franchise system operates one of the ways that we address the pandemic was incredibly enhanced level of communication.

And we're ending up with almost weekly system wide calls and Webinars and every topic you could imagine that increased written communication and I'll focus on safety and protection of our clinics and our patients.

And so many of those those increased forms of communication and we will continue to utilize and we recognized upon and importance of that and the debt will only I think continue to enhance our ability to work well with our franchise community as we become more effective and the way we communicate and there's a number of other things that I would talk to you about debt that I think is transformative and how we will be.

A stronger company and having gone through this pandemic.

All kinds of additional staffing and a kind of a large rush of patients.

And that new store opening will and Covid, we had to spread that out and we realized that there was actually some benefit there so we step back and and really.

So we look at those types of things to wear it allowed us to kind of step back and and.

And we retool things, because we had to because of COVID-19, but actually seeing the success.

And we also had a new patient promotion that we ran in the middle of this summer, which which garnered a lot of which garnered a lot of interest so.

And where do we bring that type of promotion back in the 2021 cycle. So those are ongoing discussions, but those are two kind of concrete examples where.

Things that we had to change because of Covid may result in and some lasting impression.

Great. Thank you very much thanks.

Thanks, a lot and thank you Linda and thank you and our next question comes from Brooks O'neil from Lake Street Capital markets. Your line is now open hi.

Guys. Congratulations on the continued terrific performance.

And I'm going to do the unthinkable and ask you one and only one question.

Can you just talk a little bit about what you see as the primary challenges too.

Accelerating company store growth.

And how you.

Plan to deal with those challenges thanks a lot.

Sure. Thanks, Brooks and we appreciate it.

Yeah.

And you think about the numbers, we added four corporate clinics last year and we've now guided to between 20 and 30.

So that will not come without some unique challenges and we've had to step back and think through the resources.

So the one thing that we won't do is be under resource as we try to navigate that level of growth and.

So we've redesigned our outside the four wall kind of field overhead structure to allow us to scale and we're actually looking at new markets traditionally we've been.

More of an infill type strategy as it relates to greenfield growth trying to cluster that around.

Our existing infrastructure, but we're going to embark and some new territory and 2021, so we need to think through that as well, but really its the pace and the geography that come to mind.

I think thats right, Jay and I think what's really nice Brooks is we've learned a lot.

And this isn't the first time, where this company has tried to accelerate growth and its corporate units.

We obviously started that back in 15, and 16 and learned from painful lessons, but guess, what we learned those lessons and I think as Jacobs, saying that we're being very thoughtful and making sure that as we go forward and accelerate the growth of our greenfields that they were going to make sure that as that is resource appropriately.

You have always the same limitations or concerns and just whether it's a franchise or a corporate clinic is are there enough doctors.

Are there good sites or we can and we're getting a good sites at a price that makes sense for our model and.

And so that we have the normal issues, though and face any fast growing company and a small box retail environment, but we feel we have a remarkably talented team who can really make sure that we arent stumbling too hard and learning from our mistakes and and are able to achieve the goals that were set out for ourselves.

And that's going out there and saying, we're going up and up 1000 units is a big goal and it's going to require everybody and this company focus on making sure we achieve it and our franchisees and our regional developers and our Doctor. So there's a lot of pieces moving there, but we feel that we absolutely can get there.

Fantastic, Thanks, a lot and keep up all the great work.

And thank you very much.

And our next question comes from Jeremy Hamblin from Craig Hallum Capital.

Your line is now open.

Thanks, guys I'll add my congratulations on a truly impressive year really in any environment, but let alone COVID-19.

I wanted to just follow up on the development.

Company operated clinics and the first question is.

Can you provide some capex guidance for 2021 and number two is whether or not you've seen any changes around anticipate any changes in terms of the cost per new unit kind of the upstart cost the company operated clinics and what you expect for <unk>.

The four wall.

Loss and <unk>.

And your one.

Sure. The first part of the question was around cash Capex.

Debt markets. So however, many greenfields, you're estimating that would be your kind of capex investment at the Greenfield level. In addition to that Opportunistically. We do look at acquiring franchise units back the Capex investment would be based on valuation and the stronger performing unit would warrant.

But that's kind of some of the larger drivers of Capex.

In 2021, the largest of which being those greenfield units coming on board.

The second part of your question.

Was ultimately asking about the four wall impact I think the simplest way to think about that as we have those greenfield units come through.

Really.

If they are riding out through the through the early part we talk about our time to breakeven. So you've got your Capex investment and you've got those working capital losses.

And we said that the units are breaking even and somewhere in that six to nine month timeframe and so.

As you begin to ramp while we have improved the grand opening process and we've improved on that growth that time to breakeven.

They'll have working capital losses, you've got Grand opening marketing costs, you've got to hire and train a doctor before you have your doors open.

And its simplest form you are looking at probably 100000 of loss on an adjusted EBITDA basis for each one of those greenfields as youre kind of working through all those upfront costs. So.

And so thats kind of a simplified way to think through that.

And I know there was a third question of snuck in there and that was really what what's the trends moving in terms of build out costs and.

And I'd say that we're seeing some trends a little bit change by market. So for example, and California is Jake was referencing were seeing cost of the overall build out higher than for example from the other markets like Arizona.

I'm not going to say, we've seen a lot of that because the type of units are the locations. We're going into are still about a one small box retail space and theres still a lot of competition around that and there's certainly a lot of units out. There then and developments that are that are struggling and losing their anchor and they'll give you that but we don't want to be there either so I think that.

We are continuing value engineering, the actual build out cost itself and looking at ways that we can reduce the cost and still maintain the quality of our buildup.

And so it's kind of a I think that as a trend we would we're not except for in specific markets like California, and we're expecting the overall cost to kind.

Stay relatively flat and we will still watch what's going on with the real estate.

Great and kind of related to the Capex question that you were you were getting into the investments and access and this is part of where I was going.

In terms of thinking about that and.

Investment, which I wanted to see if you had a sense of whether you expect the implementation of that system to result in a bump in your average revenue per location per.

One quick question part two is whether or not.

You would potentially take a higher.

Charge from franchisees.

Once that systems in place.

Sure. The first part is would we expect to bump. So I think the important part is to realize that first we're moving from.

And so we're not going to have that rolled out until the summertime. So.

Jack I couldnt be more and then just because we know right now is the essential thing is to do this lift and shift to get off this homegrown platform to a world class platform that we can really unleash the power of the information that resides in our system, but but and the beginning and.

And that's going to come down the road and that's why we're making that investment but right now.

And it's just the lift and shift is taking what we currently have and putting in a format that we can then use.

The real power of that CRM.

Model that ultimately Jake was referencing the different opportunities and.

And then the second part Jeremy was do we expect to to charge more for the fees. We do not those are all outlined and their respective franchise agreements. We did go through and ITC increase.

And then 2019 timeframe and really tried to be anticipatory understanding that there is a greater technology cost you know there is a cost to innovate and we have to keep up on a technology front. So we tried to be proactive with that and we worked through that with our franchise base, but we do not anticipate.

Any increases in the near term.

It sounds like a great opportunity for 'twenty two last question from me.

In terms of thinking about your customer base and the stickiness of your customer base.

And you work to flashback to your customers your customer base from a year ago, what percentage of those customers have come in for an adjustment in the past three months do you happen to have like a range that you'd be able to share with us.

All of that.

Yes.

Let me make sure I'm understanding the question can you rephrase the question, Jeremy how many of our customers and it didn't.

What.

Yes. So if you were to flashback to your customers that came into joint location in Q4 of 2019.

And what percentage of those customers came back for at least one visit let's say in Q4 2020.

And then compared to 2019.

So I'd say, that's increasing if.

If we look at 2020 the metric most impacted negatively negatively by the pandemic was our new patient counts.

And that kind of makes sense to me because what we're seeing is if you're if you're in the middle of a pandemic and your and pain and you don't want to go out there because you are really fair rightfully self concern is that you've got to be and a lot of pain to be able to be opening that door to join to a car practic clinic for the first time.

What we've also done is those clinics, who actually do make that journey are converting and join him as a member at a higher rate than we've ever seen and the history of the company.

I would say that we've seen during the 2020 as our attrition rate actually has.

Flattened or improved its overall system. So we're seeing people stay with us were seeing people convert faster and the biggest challenge. We're seeing is just getting those new patients and the door now we found a lot of successes Jack was referencing earlier about the promotion and the summer where we're doing a free adjustment for any new patient.

Is that something that we see some some opportunities going forward absolutely.

But I would say that and the more broader term and as our existing patient base and stickier to us.

And we need to continue to focus on bringing those new patients and for the first time.

And.

Great. Thanks, guys and all my requires.

And the guys.

Fantastic great job.

Thank you.

And our next question comes from Michaels and Bran from Roth Capital. Your line is now open.

Yes.

It's a highly cash flow generative model and you can see and 2020, we did over $2 million and operational cash flow.

On our.

Our balance of call it 500 something units.

And so as you roll that number forward.

There is a lot of cash flow.

Very focused on increasing the unit count reaching that goal of a 1000 units by the end of 2023.

And then we will.

Take care of some of those additional cash issues a little bit later down the line.

Great. Thank you.

I'm going to answer the second part of your question first and the answer is we don't have the data to answer that question.

We've had very limited joint store concept. So when we're talking about actuals, we've had one which was we put a joint in existing concept call Relaxer back and then we had a second one where we took the joint and put it in.

And the airport inside of express spot.

I would tell you the one clinic debt has closed there's still close independent Nick is in fact, and the airport and Austin, Texas.

And so we have very limited experience in terms of what is the true economic difference of performance of these disease.

Nontraditional growth versus our traditional clinic.

I would say that we do see this as an area of.

Great opportunities you can kind of just expand what does that look like whether it's a military base or whether it's a large chain of retail concepts out there that has room to put it.

Small joint inside their business I think that there is huge opportunity to explore.

We're still primarily focused on the core of our primary over traditional clinic.

But we absolutely will continue.

Continue to invest and look at these other opportunities as we go forward.

Thank you guys.

Thank you.

And our next question comes from Anthony Vendetti Maxim Your line is now open.

Thanks.

Two questions one on the <unk>.

Marketing campaign, what's the expected ramp and the dollars and how should how should we look at.

How those dollars will be spent and then I just have a follow up on the clinics.

Yes. So when you think you think through marketing.

You will see an increase in scale and.

In terms of.

And those will be used on a national and regional campaigns and it'll be focused largely in the areas that we have those dollars channel to now and Theres a great deal of it heading into the digital space and we just mentioned and the script that we will continue to rollout our new national AD campaign, and growing and sophistication. So we would expect those to scale the other way.

Youre going to see sales and marketing dollars scale.

And with clinic growth, specifically and our corporate clinics. So as we add corporate clinics, we have a kind of a per months.

Per clinic spends that we have so youll see those two lines continue to increase and the year. So as we look at how that Leverages the national marketing fund scales.

Directly with our growth sales and we're always mindful in terms of the per clinic spend on a corporate basis to make sure that we're getting the biggest bang Bang for our Buck. There. So you will see that dollar pool increase in size, but we're always focused on leverage as well.

A number you think is.

And is.

And sort of the plateau.

Number in terms of total number of new clinics, where you start to hit saturation and some markets or has that number been adjusted as.

As you've looked at how the markets have evolved since then.

And I would say it absolutely is dependent upon.

And how the market continues to grow Anthony that if you look at that and some.

Some of the stats and we just gave okay. When we first day that survey or is this your first time to ever see a car pressure it was 13%.

Last year it was 27% so what we're doing is not just simply taking market share what we're doing and building market and when you go back to where that 800 number came from and that wasn't just okay. If there is 41000 practitioners out there I mean why can't we do 800 is what we did is take this incredible database, we have of our patients and looked at the demographic and psychographic elements of where our current footprint.

And then went out and said okay. How many new how many additional points of distribution replicate that footprint and that is where that eight 500 plus tons from what's interesting is we see and some of our more dense markets like here in Arizona, we have and as franchisees, who are literally splitting their own protected territory, adding and clinics and.

And increasing the value of both those things very very quickly.

And so we're seeing some self cannibalization because again the market itself is expanding so quickly as we bring these joint into that market. So.

What is the what is the top of how many units we can have and this country.

It's a great question I think it will continue to expand over time as we watch the market expand and you can create more and more density as it relates to this concept.

Okay very helpful. Thanks.

Thanks very much.

Thank you thank you and.

I would now like to turn the call back over to Peter Holt CEO for closing remarks.

Thank you very much Justin.

Thank you all for your time today and as a note and we plan to participate virtually later this month and the D. A Davidson growth and consumer conference and the Roth Annual conference.

And we've heard so many patient stores, we lay and their personal stories on how the joint has helped them during the pandemic and I wanted to just share a couple of them with you.

And ICEE ICU nurse from Arizona wrote and I.

Covid hit us hard and really took a toll on my back my patients are typically on a ventilator and to data, meaning they don't move on their own they require a lot of attorney and which can take a toll on your back that's why I started seen car Practic care. It's made my mobility, so much better over the last couple of months and I'll continue to grow.

A breast cancer survivor, and a yoga instructor from Texas reported seeing my Doctor. Once a week is help me and maintain the release and balance I need to fill and my spine.

Their visits, especially during Covid has been a light I'm, so grateful for the service and the attention and I get from every adjustment.

And finally, a COVID-19 long haul or from Nevada noted.

Contracted COVID-19, and March 2020, and had been suffering and ever since with severe pain care and my entire rib cage Stern and Bakken net this pain and radiate from my head and all over which is quite debilitating during and intense flare ups. My shortness of breath will completely not me and I'm unable to work or even go up the stairs and my home and friends.

And recommended that I tried to joint and I Couldnt be happier my weekly visits enabled with Doctor to assess my misaligned ribs, and sore neck and work everything out gently and comfortably and so grateful for my Doctor and a joint I've not had a headache and weak and have now been able to work continuously without having to take off since I've joined the joint.

Thank you all stay well adjusted.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Q4 2020 Joint Corp Earnings Call

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