Q2 2021 Joint Corp Earnings Call
[music].
Good day and thank you for standing by welcome to the Joint Corp, Q2, 2021 financial results conference call at.
At this time all participants are in a listen only mode.
At the Speakers' remark there will be a question and answer session to ask a question during that time, you will need to press star 1 on your telephone please.
Please be advised that today's conference is being recorded.
If you require any further assistance during the call. Please press star zero and I would now like to hand, the conference over to your first speaker, Mr. David Bernard LHE Investor Relations. Thank you. Please go ahead.
Thank you Robert Good afternoon, everyone. This is David Barnard of L. A and Investor relations on the call today, President and CEO, Peter Holt will review, our second quarter 2021 performance metrics and provide an update on the business.
CFO, Jake Singleton will detail, our financial results and guidance and Peter will close with a summary, and open the call for questions. Please note. We're using a slide presentation that can be found at H T. T. P. S backslash IRR dot the joint Dotcom backslash events.
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 S. E. C. For the year ended December 31st 2020, as updated or revised for any material changes described and any subsequently filed quarterly reports on on form 10-Q or other SEC filings.
We anticipate filing or June 30th 2021, and 10-Q on August 6th as a result, we caution you against placing undue reliance on and you just forward looking statements and encourage you to read your 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 on.
I'll be getting ourselves to revise our results are publicly released any updates to the forward looking statements and 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 then GAAP measures alone.
Conciliation of net income to EBITDA and adjusted EBITDA is presented and the press release. The company defines EBITDA as net income or loss before and it interest task tax expense depreciation and amortization expenses accompany defines adjusted EBITDA is EBIDTA before acquisition related expenses.
[noise] bargain purchase game and.
Net gain loss.
On disposition or impairment and stock based compensation expenses turning to slide 3 is my pleasure to turn the call over to Peter Holt.
Thank you, David and I welcome everybody to the call.
Head to the same period prior year.
Revenue grew 61% compared to Q2, 2020, and 15% compared to Q1.2021.
Adjusted EBITDA increased $3.8 million up 237% from Q2, 2020, and 9% up from Q1.2021.
And on June 32021 are unrestricted cash was $18 and $8 million compared to $26 million at December 31, 2020.
Turning to slide 5 I would like to review our portfolio.
Regarding clinics during Q2, we opened a record breaking 41 clinics 36 franchise and 5 Greenfield.
Compared to 12, and 1 respectively and the same quarter last year.
This brings our 6 month total to 54 clinic open compared to 30, and the first half of 2020 and 29 and the first half of 2019.
4 of our Greenfields, where and a cluster strongholds and Arizona, California, and New Mexico.
Our fifth Greenfield and Virginia marks our first corporate clinic, and a brand new market and over 5 years.
This important milestone expand our presence in the southeast and and supported by a continuous operational improvements.
Most recently, we benefited from advancements and our Grand opening program and investments and digital marketing.
During the quarter 3 of our franchise clinics and 1 Greenfield open and April achieved goalie status, which means they attracted over 400 patients reported over 30000 and sales and the first 2 months of operation.
On April 1st we acquired 8 previously franchise clinic, which were immediately accretive to the bottom line.
To the acquired clinics were and the Phoenix Scottsdale market, expanding our reach and our headquarters region 6 of the acquired clinics, where and North Carolina made possible by the repurchase of the Rd territory and that state further broadening our corporate clinic presence in the southeast.
Once again, and we did not closed any clinics this quarter.
And summary at June 32021, we had 630 clinic and operation consisting of 555 franchise clinics and 78 corporate owned and managed clinics.
Our portfolio mix shifted slightly with our corporate clinic representation, increasing 1% to 12% of the total and our franchise clinics adjusting to 88%.
At the quarter, and we had 282 signed agreements and some level of development.
This compares to 260 on March 31, 2021, and reflects the increased interest and our franchise system.
Turning to slide 6 we're tracking to our midterm goal and the thousand clinics opened by the end of 2023, and we're confident and our continued clinic expansion through our franchises and greenfield openings.
1 natural extension of our customer base is to build upon our commitment to support the armed forces.
We continue to on our military by providing them discounts to our to our services across our clinics and.
And July we announced our partnership with the Army and Air Force Exchange service will bring chiropractic care on base to better serve members of the entire military computer community.
Our initial target clinic sites include Air Force bases, and Phoenix, Arizona, Tampa, Florida, and Trenton, New Jersey.
The exchange server and eligible customer base and 33 million active duty service members of their families retirees and their families along with disabled veterans and governments civilians, who work on the military installations.
The exchanges has more than 4900 facilities around the world.
Turning to slide 7 and the second quarter of 2021, and we sold a record breaking 63 franchise licenses, bringing our sixth month sales to 89.
This compares to 11 and 35 franchise license sales for the second quarter and the first half of 2020, respectively.
Our brand continues to attract sophisticated well capitalised franchisees with proven track records.
During the second quarter original developers sold 87% of the franchise licenses and they continue to accelerate our growth.
And June 32021, 70% of our clinics were supported by 21 R DS, which covered 59% of the Metropolitan statistical areas are msas.
And may we elected to renew to our day agreements with continued growth opportunities and those areas.
This and grief increases our aggregate 10 year minimum development schedule for new already territory's established since 2017 to 693 clinics.
Keep in mind that a portion of this clinic count is already opened but still provides a large foundation to fuel our continued clinic expansion and sales growth.
Turning to slide 8 this discuss marketing.
We continue to set monthly record for new patient acquisitions during Q too with the best April May and June months, and our history.
This reflects growing consumer confidence the benefit of increased national awareness advertising and the strong marketing contributions of our regional co op.
And may we kicked off a new marketing campaign, emphasizing the positive impact of chiropractic on good posture, particularly relevant was arrived and the remote work and distance learning.
The campaign was supported by 18 television and radio interviews from media around the country and we're pleased to drive over 14000 unique visitors to our new posture website.
And June we launched Gwyn backed campaign directed to are inactive patients. This is our fourth consecutive year executing this direct marketing promotion and I'm happy to report that the number of patients who reactivated their membership rose 32% versus 2020.
Finally, we continue to reap the benefits of our new patient digitally nurturing platform, which we rolled out and queue for 2020.
This technology enables are cleaned our clinic teams to guide their digital leads to their initial journey to chiropractor.
And Q2, 2021 or digital lead conversion reach and all time high improving 38% compared to our performance and 2020.
Turning to slide 9 let's review our initiative to improve our infrastructure.
I'm pleased to announce that in July we successfully launched axis, 1 point, though the first iteration of our new it platform.
To the extraordinary efforts by our implementation team and our franchise community. We are now live nationwide.
As a result over 630 clinics transition from a former homegrown platform to our new licence CRM built to foster continuous improvement.
We now move to the typical debugging phase and any transition of this magnitude must go through.
Looking forward, we are preparing to unleash the power of our new Sierra and platform with future enhancements that include improved business intelligence market and automation patient portal mobile chicken and more.
This first critical phase was a great accomplishment and I'm incredibly grateful for the dedication and efforts and everyone in on network.
Help this to make this a reality.
And with that check I'll turn it over to you.
Thank you Peter.
And and turning to Slide 10 is Peter stated Q too was a record breaking quarters to provide context I'll review sales from Q2, 2019, as well as 2020 and 2021 to take into account the impact that the pandemic had and our business last year.
Q2 system wide sales for all clinics open for any amount of time increased to $87.8 million up 64% year over year, and 2021 compared to 2% and 2020 and 34% and 2019 Q.
Q2 system wide comp sales for all clinics open and 13 months or more or 53% and 2021 compared to a negative 6% and 2020 and a positive 25% and 2019.
Q2 system my comp sales from a chair clinics opened 48 months or more where 44% and 2021 compared to a negative 10% and 2020 and a positive 18% and 2019.
When reviewing our operating statement I typically provide color regarding our variances by line item.
Q2, 2021, all of our variances reflect both the increased number of franchises and company owned and managed clinics as well as a favorable comparison to Q2.2020 at.
As such I will only speak 2 additional factors.
<unk> Avenue was $22 million up $7.6 million or 61%.
Company owned or managed clinics contributed revenue of $11.4 million, increasing 67% from the second quarter of 2020.
Franchised operations contributed $8.8 million up 53% compared to the same period last year.
Cost of revenues was $2 million up 49% over the same period last year.
Selling and marketing expenses were $3.1 million up 76% over the same period last year. This reflects the larger franchise clinic base and the timing of the National marketing fund spend as well as an increase and local marketing expenditures by a company owned and managed clinics.
G&A expenses were $11.6 million compared to $8.5 million.
G&A as a percentage of revenue and Q2.2021 was 57% down from 68% and Q2.2020.
And 32021 compared to the same period and 2020.
Revenue was $37.8 million up 44% compared to $26.2 million and the same period of 2020.
Operating income was $4 million up 296%.
To the same period and 2020.
Net income was $5 million compared to $931000 and the first half of 2020.
And adjusted EBITDA was $7.2 million.
Up 160% compared to the $2.8 million and the same period of 2020.
On to the balance sheet and the cash flow review.
At June 32021, our unrestricted cash was $18.5 million compared to $17.8 million at March 31, 2021, and $26 million at December 31, 2020.
During the first 6 months of 2021 net cash provided by operating activities was $9 million, which was offset.
Set by $8.9 million of investing activities, consisting of acquisitions Greenfield development and capital expenditures as well as the $2.7 million repayment under the Paycheck protection program loan that we took out in March of 2021.
And we repaid in March of 2020, 1 on to slide 12 for a review of our guidance for the full year 2021.
Based on the strength of our Q2 performance as well as our increased franchise openings and Greenfield activity, we are raising all elements of our guidance.
We now expect revenue to be between 77 and $79 million.
From 37, 5 to $77.5 million the updated midpoint reflects a 33% increase compared to 2020.
We now expect adjusted EBITDA to be between 12, 5 and $13.5 million up from 11 to $12.5 million.
Note. This guidance includes the impact of a greater number of Greenfields that will be more heavily weighted in the second half of the year.
The updated midpoint reflects a 43% increase compared to 2020.
We now expect franchise clinic openings to be between 90, and 110 up from 80 to 100 and the updated midpoint reflects a 57% increase compared to the 70 in 2020.
We now expect company owned or managed clinics through a combination of both greenfield openings and franchise clinic purchases to be between 25% and 35 up from 20 to 30.
The updated midpoint at 7.5 times greater than the 4 opened and 2020 and.
And with that I'll now turn the call back over to you Peter.
Thank you Jake.
Turning to slide 13, the numbers speak for themselves and I am so proud of our team who repeatedly identify develop and delivers on our growth initiatives and the franchise community who implement these programs.
Our future is even brighter.
Have so much room, and our business model to expand far beyond the mid term goal of a 1000 clinics market trends support our industry growth. The June 2021, <unk> report estimates of industry revenue to increase and annualized rate of 2.2% to $17.9 billion by the end of 2020.1.
With our annualized revenue, we have approximately 1% market share and there is plenty of opportunity to increase our patient base from existing car practic users alone.
In addition, there is room to grow the overall market is only 50% of the U S population knows about car Practic care.
Notably that nearly half a million new patients who visited the joint in 2020, 27% of them have never seen a chiropractor before.
This increase from just 16% and 2013, demonstrating our increasing ability to bring new people into the category and grow the number of car practic users.
Given the macroeconomic climate and the industry dynamics and the June 2021, Kelly insights car Practic care market Research report, that's a mouthful forecast industry revenue growth rate for the next 5 years to be up 5.4% per year.
Joint consistently outperformed the industry in fact, our system wide gross sales 10 year CAGR of 70% dwarfs these rates.
And the clinic level currently sites the average annual revenue per clinic and the industry is approximately $300000 and 2020. The joint average clinic revenue was approximately $490000 with our top performer exceeding over $1.5 million.
Our success reflects many key differentiators.
We leveraged knowledge and experience, helping us to create efficient operating models.
We increasingly attracts sophisticated franchisees and accelerated our national footprint.
Implement effective hiring and training practices to attractive finance doctors and.
And utilize national and regional marketing programs to support our business and build our brand.
In addition, we lead general public education efforts, which attract patients who have never tried chiropractic care before and.
In fact, the joint is the largest online publisher of car Practic information and the world.
And also to educate doctors and car Practic about the joint we continue to deepen our relationships with associations and the 16 and credit card purchase growth and the United States most.
Most recently, we became a life universities official athletic scoreboard sponsor, which increases our ability to engage and student body to provide internships and employment opportunities through our clinics and.
It also complements our standing athletic sponsorships with schools, such as the University of Houston University of Miami University of South, Florida, and most recently Vanderbilt University relationships like these enable us to draw out the natural connections between car Practic and sports performance and exposes our brand to a wider audience.
Overall, we continue to invest and the future and fact, our decisions like increasing greenfield clinics that expand our market position and brand awareness focus on long term growth and are expected to impact our short term profitability.
We are marching toward our goal of a 1000 clinics in operation by the end of 2023, and we expect that to be the tipping point that will ignite the next phase of accelerated national recognition and long term expansion.
I'd like to thank our entire system, our doctors are wellness coordinators, our franchisees regional developers and corporate staff for their dedication to our mission of improving quality of life for our patients.
Robert with that and ready to begin the Q&A.
Thank you and at this time I would like to remind everyone in order to ask a question. Please press star 1 on your telephone keypad again to ask a question that will be star 1 on your telephone keypad.
We'll have our first question coming from the line of Mr. George Kelly with Roth Capital Partners. Your line is open.
Hey, everybody. Thanks for taking my question and congrats on a nice quarter.
Thanks, John.
So a few questions for you first.
Maybe about the guidance you provided.
Yes.
And I'd play play through my model and just trying to back into what you've.
And what you've given for full year, it's a real kind of flattening.
Of growth of same.
Store sales, Chris and the back half can you talk to or are there any kind of promotion and the second quarter or anything unique.
That won't be repeated in the back half of the year. Just anything you can you can talk to you there.
Sure, Yes, I think.
As I mentioned and that element of the guidance and the prepared remarks George.
And and the second quarter, and you mentioned digital lead conversion improving and a few other things I was just wondering if you could dig into that more what exactly.
Any kind of quantification around your new patient acquisition and a quarter would be helpful. I think you may have given something but if you could repeat it and then just exactly what strategy.
And your view is really driving net.
George I think I think for me.
The increased sophistication of our digital tactic and certainly a driving factor, but as I look at the strength of overall, new patients and the quarter to me. There's a few things 1 and I think we have to acknowledge that.
Overall consumer sentiment and the second quarter with increased so I think we have to acknowledge that we had some winded are back as it relates to that kind of macro environment.
The second I think we have increasing brand awareness and the scale of our system and.
So we've always said that we're going to build through our store fronts, and so the greater scale and awareness and awareness marketing dollars that we have out there is continuing to add that new patient acquisition.
And next would probably be the sophistication of our co ops. We now have I think it's 37 co ops around the country and those local dollars that they are putting to work or large contributing factor and then we continued to be more sophisticated and our digital tactics. So.
So I think it's all those combine that are leading to those strong new patient figures.
Okay, Great and then last question for me.
Just about the the announcement from.
Last week with the Army and Air Force Exchange service.
So what exactly does.
That relationship.
Does it basically open up those facilities for you to start to.
Scott for location and so you sort of get certified and then and.
And what do you think that sort of.
Location and Tam could be.
Took that opportunity and that's all I had thank you.
Sure. Thank you George and and to answer that question is that yes, we have signed an agreement and agreement calls for those 3 clinics are on the air force bases that I mentioned.
There is opportunity to expand that.
Well, yes, there is 4900 fulfilled.
Facilities across the world.
That's the contract really is what they do is that each base has to give and approval that they want and backed the car practice clinic to be on base.
And then we work with the with the exchange to negotiate the term or the number of bases that we're adding to the contract and so it's.
It's really incremental.
At the moment, we are we are committed to the 3.
There's opportunity that will continue to expand into.
Interest on other bases.
Is realized and we go through a formal approval process really base by base.
Alright, Thank you and again, if you wish to ask a question. Please press 1 on your telephone keypad.
Development, but with that you have that short term suppression of earnings. So I think that's really the macro and the other thing is.
We're going to continue to be smart and the way that we do this we want to make sure that we're appropriately resource and have the infrastructure and.
So a lot of factors that go in there and we also mentioned and the it platform now moving to an element of G&A. So you've got a little bit increased costs there.
And that will come through and the second half of the year and beyond so a lot of those factors that are weighing in and I think you have to acknowledge that we've still got the Covid era and there is an element of uncertainty there and so all of those things playing into.
Those estimates and the forward guidance.
And okay, so sequentially, you're still expected revenues up but.
Could you answer the question on the quarter to date trend maybe on a system wide comp performance.
Yes, we won't comment on on Q3, so far we're excited about the queue to results and then we will point to the forward guidance for the back half of the year.
Okay.
Let me just follow up on the point understand the G&A ramp over the next.
A couple of quarters here as you get more greenfield's out there I did want to understand though the selling and marketing costs.
Timing of the national marketing funds spend.
Is an expectation you know that your sales and marketing costs.
On and absolute basis are unlikely to trend higher.
And Q3 and Q4 than what you just spent and Q2.
Yes, I think the important part of of Q2 is really that timing element right. We were a little bit light and Q1. So we had some favorability there some.
Some of those costs rolled into Q2 and now you've seen some higher.
Higher cost as it relates to Q2 now at the end of the day a lot of those costs for us we.
We expect to even out so, yes, and a perfect world, we would have those perfectly spread out throughout the year, but there is an element of timing that just coincides to the tactics and the development and we're we're deploying those dollars so I think that.
Largest thing I'll highlight there is Q2 did have that element of timing.
We would expect again the components of that line are largely and the 2% that contributed into the national marketing fund and we always try to spend that full full pool of funds each year and and the second is our local spend for our clinics now we've got more clinics coming on line each of those we have a grand opening marketing.
Cost associated to it and so with that we want to make sure. They start on the right foot and so you're going to see some additional sales and marketing that come through from those grand opening effort as well and.
So cute.
Q to kind of has a little bit excess and it is we were a little bit light and Q1, that's at timing element and then you've got those other factors to consider as we kind of move throughout the rest of the year.
Okay.
Great and then just wanted to follow up to on the.
The access access system and to.
Terms of the implementation of that 1.
Peter I think you mentioned that.
Kind of normal.
Fits and starts when you turn out a new CRM system.
And I wanted to just make sure there wasn't anything that you felt and.
And the bugs and working that out that as is.
Impacting top line ability and 2.
Jake I just wanted to make sure that I understood in terms of where that line item is likely to fall is that is that going to impact your G and a cough or where will the.
Expense for that fall into it.
If it's falling into that and it cost of revenues.
Or another category.
Okay, what about your accounts without question, but to Europe question to me is that.
Do we believe that the implementation and this new IP platform is going to impact top line sales answer is no.
That do we believe that there is bugs that you're going to have to work through and challenges and we're going to get through and learning that we're going to go through absolutely we spend on a huge amount of time working with our franchise community.
Creating training programs, so that they know how to use the system.
This is not just simply a C R and system goes okay. This managing.
With our patient and this is a system that we use as our system. We use it for all right do analytics on the business and even helps with us and the patient flow at the clinic level and then 100% of our system is on it and utilizing it and so just given the size of our business and this conversion from our homegrown crap our home grown platform.
For them to this new Ciara and platform. It's just inevitable that you're going to have these these these cleanups and bugs that you you try to minimize and and the research and and the testing period.
And then we will get through them and so I would say that there is I have seen absolutely nothing though and suggested there is going to impact on top line sales were describing this very clearly that this is day lifting shift we know that there is a lot a cup of income.
Paucity that day.
Built into this new platform that we're going to unleash overtime right now for us and the way I look at it for the rest of the year is really focused on just getting everybody comfortable working effectively and then we can start really seeing what we can do to.
To add the programs and I had mentioned and my and my formal remarks, so Jake for you share and then where those costs will come through and it'll be 2 fold.
A portion of them will come through and the cough.
Cost of revenue and that's the more generalized kind of web hosting costs.
Right and we've got a lot of patients we've got a lot of data and therefore, we've got a lot of.
Capacity that we need up and the cloud so that'll come through and it cost of revenue and the second piece and really the licensing.
And a lot of the head count and things like that and that'll be and corporate overhead for us so and the non operating segment.
And that said Janet.
Great. Thanks, Thanks for the collar guys and best wishes here on continuing to pursue.
Form so strongly.
Thanks, Jeremy.
Our next question and will be coming from the line, Jeff Van Sinderbrand and with B O'reilly Your line is Simpson.
Hi, everyone and let me add my congratulations.
Just to follow up a bit more on the new software I'm from and implementation and by the way.
Great to hear that you've got it out there any sense of timeframe.
Sort of the debugging phase and maybe any color on how Frank franchisees are working with it so far and I guess, what you're seeing and your corporate clinics that are running it.
So far at this phase.
Yeah, I would say that.
Jeff.
We really did spend and an enormous amount of time educating all of our users on how to use this new system. Because we knew we were going to a brand new system. We have kind of 2 parts to it we have the front office for our wellness coordinated and we have the back office, where the doctors are using it to document all of the patients that they're visiting and that the back office is probably closer to what.
Our original platform was with the front office as a brand new platform and.
And so that we had this.
Requirement that 100% of the users had to go through the training before we would started this process and I am July the day that they did.
And there are.
Our entire network has been so much time and energy and helping to prepare for this to make this go as seamlessly as possible and.
So what are what are my hearing and so I think as so often happens and programs like this I'm hearing your group of people who are really excited about all the new changes I'm hearing from a group of people who have concerns or some of the bugs that they've experienced and I think and then that the vast majority of use it every day to service our patients.
And so I would say from my perspective it was.
Really.
Markedly pain free transition.
Anyway, and minimizing the challenges you face and taking something as complex as we just went through and it does take time to work them out because it's and that youth and you find out some of those little bugs and that has to be turned around and address and so what my experience and other platforms. Like this is that you'll get it the big ones right up front because they are obvious and then it'll take over time.
And where you will see little things that you don't see initially they will come up and do the hotfix will fix it so.
That part of it is going to be a Hong <unk> and probably initially the first quarter of first half a lot and then that's going to go down significantly, but then we have the other part of her we're going to be continually refining and improving the process because there's all kinds of ways. We can improve the way that we designed already and so the ongoing continuous improvement will be a fundamental.
Part of how we utilize this platform for its entirety.
Okay, Great and then let me ask you. This would you would think that the new software improves efficiency, but also that it may improve customer experience.
Which might benefit customer retention can you speak more to that or I guess, how you see benefits manifesting from the new software system.
I think there's no question that there will be enormous benefit on the consumer side on the patient side, but that's not quite hear that for example, when we roll out our mobile check and that's when we roll out the patient portal and that's when we rolled out where you can be tracking and your membership and how many how many.
Patient visits you have left from your monthly membership and so those are not and place at this moment, but those those are some of the features that are specifically patient and forward facing that I, absolutely believe will enhance the patient's experience.
Again, we're just not there today, but.
So we're going to get to.
Okay.
And then would you anticipate any change and customer behavior with the Delta very and just obviously, where there is still uncertainty out there about the.
The pandemic of Covid.
And then any changed your safety protocols as a result of Delta.
It's such a great question for not just us for everybody out there is what is ultimately when the impact of Delta variant on our lives on our businesses and.
Really the main thing I have to draw on his how did we experienced the COVID-19 to date and what we experience is that our clinic stayed open where and essential health care service and that our doctors continue to serve and most importantly, our patients came into the clinic. The impact we had was greatest on our new patient count as we've talked a lot about.
As you heard on the call that would that has recovered and and and exceeding numbers that we've ever seen before.
If this really blows up across this country would I expect that and maybe have that same kind of impact on paid new patient kind of and I would read yes, I think so what I expect our our patient base to continue to come in between absolutely see this essential to their health care absolutely and.
So.
The best I have in terms of what what do I expect to happen with wherever we go with the Delta.
Variant, which I think is a concern for all of us and the second part of your question safety protocols safety protocols and and what I would say is.
We are continually looking at that but we have also maintained our safety protocols from the beginning so well I know, there's other states and communities that have for example, remove the requirement to wear a mask that we are still requiring non of patients. We always will fall whenever the director business day their community that we're operating and but as a network.
All of our doctors weapons coordinators staff and the clinics are required to wear a mask and.
And that hasn't changed and that was also guided by the CDC that wasn't an issue, we may where healthcare service and when the CDC came out with their guidelines as that day. We've made it very clear that health care services still required to wear masks and we continued to follow that that protocol and so I would say that we have not in any way lessened our protocols as we go for.
<unk> today and will continually look at them depending on how things are taking place is this pandemic continues to unfold. What we do know is it's it's improved and you saw that and the numbers and Q too and.
And we'll see where that takes us to the rest.
Of the year.
Right. Okay. Thanks for taking my questions and continued success.
Thank you very much thanks for the support.
And again, if you wish to ask a question. Please press fire 1 on your telephone keypad.
Our next question will be coming from the line if Bruce O'neil Lake Street capital on your line is open.
Hi, This is Michael how pulling and for Brooks.
My first question is in regards to on.
The new <unk>.
That form so when you think about the general business infrastructure, where do you need to and best to be able to scale 2000 and clinics and beyond.
Well I think the investment for the business.
If you are asking where do we need to invest and be able to achieve the clinical opening of a thousand is by the end of 2023, I think it's pretty clear, it's going to be and Greenfield, we've made that very clear where accelerating our greenfield. This year, that's a huge and part of the investment that we make.
Do we expect that to continue to accelerate as we go forward between now and and of 2023, that's a real possibility.
Obviously this is about units and so on the other part of that is franchised and so we'll continue to invest and our franchise community and are and and making aware of those and people interested in buying a franchise and learn about the joint and why this could be a good investment for their their family and their lives and so we will continue.
Renew to invest and the franchise side of this the other piece.
And for his viewing this business and.
Is that we have to continue to improve the operations and the business, whether it's looking at it from and a perspective from and operations perspective from a marketing perspective. So we have been continually and investing more resources and our marketing department and more resources and our operations Department more reaches of resources and our I T Department to support this accelerated.
So those are the real buckets that we're going to make those investments and.
I wonder if they got anything to add to that.
No go ahead and Michael.
And then it looks like you had a really great strong corporate store openings can you talk to the drivers here and if we can expect to see more quarters without size growth and the corporate stores.
Absolutely Yeah, we had 5 greenfield that opened up.
And a lot of them and the back half of of Q too but.
But again signaling that we've got a lot of anticipated corporate store openings and the second half of the year.
So.
That is that is very much going to come through and you'll see that acceleration and we increase that corporate clinic guidance.
As part of this release, so yes, I think you'll definitely see that we have continued confidence.
And we're looking forward to increasing that pace and we got.
Additional resources there that's why on the last call, we talked about new VP real estate and construction and part of that was again to make sure that we're giving the for emphasis on that side of the business and will continue to reinvest.
Okay. Thank you guys.
And then where do you feel that comps would normalize on the back half and Dear and are you guys had really strong G..2 camps.
Well not at 53%, let's just be very clear.
And might be I think the way to look at that is that and and we don't guide on comps going forward, we don't get it for the full year, but if you look at historically and let's say Prepandemic from 2016 to 2019 and that 4 year period, a few stockcar comps and was 99% year over year over year almost 25.
Percent a year and.
And demick, our comps for the full year were 9%.
As we went into Q1, and I think thats and more of a rationalize quarter to compare too because most of that quarter was not.
By Covid.
R 212021, I can think of.
20, Q1, 2022, Q on 2021, Q and 21 with 21%.
And so.
I think so.
Could we use extrapolate the and the number and and Q2 for going forward no could I rely on Q1 to give you an indicator of what to expect if we're not taking the account the impact of the pandemic I think that's a reasonable assumption.
Perfect. Thank you for taking my questions and congratulations on a great quarter.
Thank you so much.
Next question will be coming from the lineup and can even dirty words and that King groups and line is open.
Hi, This is Matt on for Anthony.
I just had a question about your your R. D is obviously you've had a lot of success.
With your regional developer from the past and I think you mentioned the cover about 50% 59% of a metropolitan area.
You have a plan for expanding.
Coverage area and how should we think about that.
It's a great question and whereas you know I truly believe and the power and value of Rd model took solid growth of a concept like this.
I would say that we also are looking at certain markets, we don't mix, our day markets with corporate development and so that there are market that we see is more interesting from a corporate perspective for growth, but I would say that there are rd opportunities out there still with the market, but so if you go back a couple of years ago and were selling 10, Rds and a year.
R D and the year do I expect that going forward note.
Are there certain markets that would make sense for us if we have the right Rd partner that can accelerate the growth and to the level that we expect.
And you could get you could expect to see that happen, but not at the pace and we were in the us and those.
92017.18 years.
Great. That's that's helpful. And then just 1 quick follow up obviously, a pretty large expansion of the clinic and development over last year.
282 at quarter, and what's a good rule of thumb in terms of what we should expect.
And Ah clinic and development to open and maybe what percentage of your clinic and development and you would expect on a quarterly basis.
And to be opened.
Well.
We don't guide on openings and a quarterly basis, we obviously guidance annualised basis, and so you can kind of extrapolate strap elite from that.
And of that group of 280 agreements that are signed and and some form of developments. We do have a lot of multi unit operation and so for example, if I just use a straight line average if I think about opening up a clinic from first contact the actual opening their doors, that's probably about 10 months process and then the bulk of that time gets used up and.
Site selection and leads negotiation.
And so that's the framework that I would expect a signed agreement to open assuming and it's just that 1 clinic, but let's say for example, if I sold a 5 pack and I would not expect that franchisee to open up all 5 clinics and at 9 months and we will put them on a timeline. So every 1 of those licenses has a timeframe and which they're required to open and.
And we're working closely with the franchisees to make sure. They are meeting those timelines because a lot of that 280, there's a lot of them are tied to and extended time and just because of their and multi unit.
Contracts.
And so.
I don't have a percentage of okay of 280, how many of those should open and you can kind of do the math yourself and say, okay. If we said we had 260.
60 at the end of March 31, or excuse and.
Q1, and and March through parts of the 120.21, and we had 280 and 2.2 we opened up 40.36 franchise unit.
So there's at least some numbers that gives you something.
Absolutely very helpful I'll hop back in the queue.
And we don't have any further questions have nice times theater and definitely backyard.
Thank you very much.
Thank you all for your time day, this fall and we're going to present virtually at Lake streets Best ideas growth Conference and September.
And given that we signed the contract with the Army and Air Force Exchange service in July and I thought it was very fitting to and like today's call with a paraphrase of a very long. Thank you note that we got from a veteran.
Very recently and.
And he wrote I served and I'd, the Iraq War with the US Army from 2009 to 2010.
Sustained the vast array of injuries during my deployment, which hindered me for a decade before I saw it.
Carr printed care for years, I struggled with reoccurring pain from head to my feet resulted in and many sleepless nights over the past few years carpet daycare and adjustments and provided me with relief I had no clue, a chiropractic care and could do for me I wish I'd known earlier, so I didn't suffer so much my outlook is improved dramatically due to the amazing staff.
A doctor's at the joint chiropractic, thank and the doctors were there Carrie receive just doesn't seem enough because it's doing their job.
Joint doctors are giving me so much look forward to and my life and I could not keep going if it's not and their care.
Thank you and say well adjusted.
And this concludes today's call. Thank you all for you and went participation you may now disconnect.
[music].
[music].
[music].
[music].
Good day and thank you for standing by welcome to day Joint Corp, Q2, 2021 financial results conference call.
At this time all participants are in a listen only mode.
At the Speakers' remark, there will be a question and answer session. So I'll ask a question on during that time and you will need to press star 1 on your telephone and we used to be advised that today's conference is being recorded.
If you require any further assistance during the call. Please press star zero and I would now like to hand, the conference over to your first speaker, Mr. David Bernard Let's say Investor Relations. Thank you. Please go ahead.
Thank you Robert Good afternoon, everyone. This is David Barnard of L. A and Investor relations on the call today, President and CEO, Peter Holt will review, our second quarter 2021 performance metrics and provide an update on the business.
CFO, Jake Singleton will detail, our financial results and guidance and then Peter will close with a summary, and open the call for questions. Please note. We're using a slide presentation that can be found at H T. T. P. S backslash IR dot the joint Dotcom backslash events.
Today after the close of market. The joint Corp issued its financial results for the quarter ended June 32021, if you do not already have a copy of this press release. It can be found on the Investor Relations section of the company's website.
As provided on slide 2 please be advised today's discussion includes forward looking statements, including statements concerning our strategy future operations and future financial position and plans and objectives of management.
Throughout today's discussion we will present, some important factors relating to our business that could affect these forward looking statements and forward looking statements are made based on our current predictions expectations estimates and assumptions and are subject to the risks and uncertainties that may cause actual results to differ materially from the statements. We make today factors that could have.
<unk>.
And could contribute to these differences include but are not limited to the continuing impact of the COVID-19 outbreak on the economy, and our operations, including temporary clinic closures shortened business hours and reduced patient demand our failure to develop or acquire company owned or managed clinics as rapidly as we intend our failure.
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, 2020, as updated or revise for any material changes described and any subsequently filed quarterly reports on form 10-Q or other.
T SEC filings.
We anticipate filing our June 30th 2021, and 10-Q on August 6th 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 our.
Selves to revise our results or publicly release any updates to these forward looking statements in light of new information or future events.
Management uses EBITDA and adjusted EBITDA, which are non-GAAP financial measures. These are presented because they are important measures used by management to assess financial performance management believes they provide a more transparent view of the company's underlying operating performance and operating trends and then GAAP measures alone right.
A reconciliation of net income to EBITDA and adjusted EBITDA is presented in the press release the company defines EBITDA as net income or loss before net interest.
Tax expense depreciation and amortization expenses. The company defines adjusted EBITDA as EBITDA before acquisition related expenses bargain purchase gain net gain loss.
On disposition or impairment and stock based compensation expenses, turning to slide 3 its my pleasure to turn the call over to Peter Holt.
Thank you, David and I welcome everybody to the call.
And the strength of our business model continues to deliver and I'm delighted to inform you that we broke records broke several records. This quarter more importantly, we expect it to continue to accelerate growth and to build upon our financial Foundation.
During the second quarter, we opened 41 clinics, including 5 Greenfield clinics and in April we achieved a significant milestone of opening our 600 clinic.
Additionally, we sold 63 franchise licenses during the quarter.
This metric supports our mid term goal is to have 1000 clinics in operation by the end of 2023 as well as our drive for longer term expansion.
I'd like to pause and welcome on new investors.
The joint is revolutionizing access to chiropractic care.
Our clinics are 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 their brand and <unk>.
<unk> awareness of the efficacy of chiropractic care and deliver an exceptional patient experience and open more clinics.
We are already the largest most recognizable provider of car practic care and the country.
However, we're only account for approximately 1% and this highly fragmented nearly $18 billion chiropractic care market.
We have a significant opportunity to continue to increase our market share as we further refine and expand the market itself.
Turning to slide 4 I'd like to review a few highlights of our second quarter 2021 results and a moment Jake will discuss our financial results in detail.
We had a strong Q2.2021.
It was further enhanced income by comparison to the Q2.2020, which is the nadir and the impact of the COVID-19 on our business.
Provide context I'll include sequential comparisons as well.
System wide sales grew to $87.8 million, increasing 64% compared to our Q2, 2020, and 13% compared to Q1, 2020.1.
Our comp sales for clinics that have been opened for at least 13 full months grew 53% compared to Q2.2020 and in Q1, 2020.113 month comp sales grew 21% compared to the same period prior year.
Revenue grew 61% compared to Q2, 2020, and 15% compared to Q1, 2020.1.
Adjusted EBITDA increased $3.8 million up 237% from Q2, 2020, and 9% up from Q1 and 2021.
And on June 32021, and our unrestricted cash was $18.8 million compared.
Compared to $20.6 million at December 31, 2020.
Turning to slide 5 I'd like to review our portfolio.
Regarding clinics during Q2, we opened a record breaking 41 clinics 36 franchise and 5 Greenfield.
Compared to 12, and 1 respectively and the same quarter last year.
This brings our 6 month total to 54 clinics opened compared to 30 and the first half of 2020 and 29 and the first half of 2019.
4 of our Greenfields, where and a cluster strongholds in Arizona, and California, and New Mexico.
Our fifth Greenfield and Virginia marks our first corporate clinic, and a brand new market and over 5 years.
This important milestone and expands our presence in the southeast and.
And it's supported by our continuous operational improvements.
And most recently, we benefited from advancements and our Grand opening program and investments and digital marketing.
During the quarter 3 of our franchise clinics and 1 Greenfield opened in April achieved go elite status, which means they attracted over 400 patients reported over 30000 himself and the first 2 months of operation.
On April 1 we acquired 8 previously franchised clinics, which were immediately accretive to the bottom line.
2 of the acquired clinics were and the Phoenix Scottsdale market, expanding our reach and our headquarters region 6 of the acquired clinics, where and North Carolina made possible by the repurchase of the Rd territory and that state further broadening our corporate clinic presence and the southeast.
Once again, we did not close any clinic this quarter.
In summary at June 32021, we had 630 clinics and operation consisting of 535 franchise clinics and 78 corporate owned or managed clinics.
Our portfolio mix shifted slightly with our corporate clinic representation, increasing 1% to 12% of the total and our franchise clinics adjusting to 88%.
At the quarter, and we had 282 signed agreements and some level of development.
This compares to 260 at March 31, and 2021 and reflects the increased interest and our franchise system.
Turning to slide 6 we're tracking to our mid term goal of a 1000 clinics open.