Q2 2023 The Joint Corp Earnings Call
Hello, and welcome to the Joint Corp, second quarter 2023 financial results Conference call all participants will be in listen only mode.
If you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw from the question queue. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Kirsten Chapman L. H a investor relations.
Go ahead.
Thank you James Good afternoon, everyone. This is Kirsten Chapman of Elly Chen Investor Relations joining us on the call today are president and CEO , Peter Ho and CFO Jake Singleton. Please note we are using a slide presentation that can be found at IR dot the joint Dot com.
Today after the close of market the joint issued its operating metrics for the quarter ended June 30th 2023, if you do not already have a copy of this press release. It can be found in the Investor Relations section of the company's website.
As provided on slide two please be advised that today's discussion includes forward looking statements, including statements concerning our strategy future operations future financial position and plans and objectives of management throughout today's discussion we will present, some important factors relating to our business that could affect these forward looking statements.
The forward looking statements are made based on current predictions expectations estimates and assumptions and are also subject to risks and uncertainties that may cause actual results to differ materially from statements we make today.
Factors that could contribute to these differences include but are not limited to our inability to identify and recruit enough qualified chiropractors and other personnel to staff our clinics.
Due in part to the nationwide labor shortage and increase in operating expenses due to measures we may need to take to address that shortage inflation exasperated by COVID-19, and the current war in Ukraine, which has increased our cost and which could otherwise negatively impact our business the potential for further.
Disruption to our operations and predictable impact on our business of the COVID-19 outbreak and outbreaks of other contagious diseases.
Our failure to develop or acquire company owned or managed clinics as rapidly as we intend our failure to profitably operate company owned or managed clinics short selling strategies and negative opinions posted on the internet, which could drive down the market price of our common stock and result in a class action lawsuits.
Our failure to remediate any future material weaknesses in our internal control over financial reporting, which could negatively impact our ability to accurately report our financial results prevent fraud or maintain investor confidence and other factors described in our filings with the SEC, including the section entitled Risk factors in our annual report on <unk>.
<unk> Form 10-K for the year ended December 31, 2022 filed with the SEC on March 10th just two.
2023, and subsequently filed current and quarterly reports.
As a result, we caution you against placing undue reliance on these forward looking statements 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 in light of new information or future.
Vince.
Due to ongoing quarterly review procedures being performed in conjunction with the joints independent public accounting firm management has postponed the issuance of its second quarter financial results as of June 30th 2023.
The matter in question is related to our regional developer arrangements that would have a non cash impact to the company's financial statements.
Management also includes commonly discussed performance metrics system wide sales includes revenue at all clinics, whether operated by the company or by franchisees well franchise sales are not recorded as revenues by the company management believes the information is important in understanding the company's financial performance because he sees.
<unk> are the basis on which the company calculates to record royalty free lease and are indicative of the financial health and franchise base comp sales include the revenues from those company owned or managed clinics and franchise clinics that in each case have been opened at least 13 full months and 48.
Full months and excludes any clinics that have been closed.
Turning to slide three its my pleasure to turn the call over to Peter Holt. Please go ahead Peter.
Thank you Kirsten and I welcome everybody to the call for Q2 2023 during an environment of continued economic uncertainty we posted growth in system wide sales supported by our ongoing franchise license sales and clinic openings and new patient acquisitions.
That said, we strive to do more and to do better as such we're implementing strategies to increase our long term opportunities I'll review these in detail in a moment.
For those investors, who are new to the company. The joint is revolutionizing access to car Practic care by providing affordable conscientious style membership based services and convenient retail settings.
Turning to slide four let's review, our operating metrics for the second quarter 2023, compared to the second quarter of 'twenty two.
System wide sales grew to $121 million increasing 13%.
Comp sales for clinics that have been open for at least 13 full months increased by 5%.
At the end of June 30 of 2023, our unrestricted cash was $13 6 million compared to $9 $7 million at December 31, 2022.
Turning to slide five I'll discuss our clinic metrics.
During Q2, we opened 26 clinics 23 franchise and three Greenfield one of which is in southern California. Another incentive fee in the third and fourth Dixon, New Jersey in conjunction with our Army and Air Force Exchange service.
This compares to Q2 'twenty to 'twenty, two and which we opened 34 clinics 31 franchise and three Greenfield. We also acquired three previously franchise clinics in Northern California, which was made possible by the acquisition of the regional developer rights to that territory in April 22, as compared to the acquisition of four previously.
Clinics in Q2 22.
In Q2, 'twenty three we closed two corporate clinics, one which will be really relocated and four franchise clinics compared to clothing, one franchise clinic in Q2 2022.
And less than 1% closure rate remains one of the lowest in the franchise community.
In summary in June 32023, we had 890 clinics in operation consisting of 556 clinics franchise clinics and 134 company owned or managed clinics.
The portfolio mix remained at 85% franchise clinics, and 15% company owned or managed clinics.
At quarter end, we had a solid pipeline for future franchise clinic openings with 214 franchise licenses in active development.
Subsequent to quarter end through the end of August 9th we opened one Greenfield clinic of nine franchise clinics and we are delighted to announce that we opened our 900 clinic in Texas earlier this week.
Turning to slide six in Q2 2023, we opened 21 franchise licenses up from 17 in Q1 2023 compared to 24 franchise licenses sold in Q2 2022.
This past quarter, 76% of our new licenses were purchased by existing franchisees.
Their reinvestment reflects their understanding and the confidence in the joined even in this environment, which we believe indicates the strength of our business model and demonstrates the health of our franchise system.
In June we required the territory rights at Wisconsin.
Reducing our regional developer count to 17.
Our aggregate 10 year minimum development schedule for New Rd territories established since 2017 with 590 clinics.
Turning to slide seven let's review our marketing efforts.
Our new patient acquisition is our highest priority and in Q2, we've implemented new tools programs and several tests and I'll review a few for you know we launched our first phase of our marketing automation initiative on May 31, with a different email series designed to support lead generation, new patient Onboarding and patient retention.
Each email campaign is tailored to the unique needs and perceptions of the prospective and current patients based on their car Practic journey.
Using our new marketing technology, we are automating the sending the right message at the right time and that patient journey.
We have multiple initiatives underway, including employee incentive plans, new lead management programs and new regional landing pages. Additionally, we're assessing appointments for first time patients to improve the experience and ensure smooth patient flow in our clinics.
We also continued to expand our digital marketing efforts. For example, we started a test with Tic Toc in four markets. The initial results were positive with leaf costs, 15% lower than when compared to meta.
Subsequently, we increase the test to include four additional markets and expanding the targeted radius and updating the creative for better optimization.
We continue to.
We continue to new promotions in our mix in April we launched a digital referral program to drive new patient counts during the most effected validation marketing.
In June we introduced the five five get one free wellness sale, which was very successful and allowed any patient Dominion advanced wellness planned purchase of five months to receive the six months free demonstrating our patient value in an affordable commitments to their treatment plan.
Lastly, we're updating their patient journey research. These findings will inform message optimization and customer experience from their initial search for car part two will be coming in remaining the patient.
As noted on prior calls car Practic care is a natural fit with sport to military and we're enjoying opportunities to support veterans in the local sports teams.
The department of manpower and Reserve Affairs conducted a trial found increased isometric strength and endurance among members of the military who received car Patrick adjustments and noted car Practic care improved cheap fitness characteristics among active duty service members with lower back pain.
In June we began a collaboration with our canine for warriors and nonprofit organization that pairs highly trained service dogs with military veterans suffering from <unk>.
Service connected traumas.
Military training deployment and the service can take a serious toll on the body physical and mental state and the canine for Warriors program mirrors. The joins philosophe philosophy that everyone can benefit from a natural approach to pain relief.
We are sponsoring an impactful conversations surrounding the shared philosophy that supports a drug free approach to wellness as well as the training and pairing of a service dog for a veteran in need.
Through our year end Brown military appreciation depreciation program. We also honor sort of active and retired members of the military as well as their immediate families nationwide with discounted initial visit the monthly wellness plan.
Also Kirkpatrick economics has several articles starting the study that demonstrated kirkpatrick boost sports performance and assist with rehab.
In July we were excited to announce that the joint chiropractic was named the official car practice for the Tampa Bay Buccaneers, Our first NFL partnership and our second Major League sports sponsorship, the Tampa and Orlando marketing co op groups, which cover most almost 40 clinics partnered with the team to highlight the benefit of routine car practic care for the loyal fan.
Based on the surrounding community.
Before I turn the call to Jake I'd like to note that I'm excited that next week, we will welcome our new Chief marketing officer with vast experience franchise experienced she's an expert in digital marketing and building customer loyalty.
We're excited to have her join the team as we implement our programs, including additional brand building efforts with a focus on increasing new patient acquisition.
And with that Jake I'll turn it over to you.
Thanks, Peter and we will turn to slide eight.
As mentioned earlier due to ongoing quarterly review procedures being performed in conjunction with the joints independent public accounting firm management has postponed the issuance of its second quarter financial results as of June 32023, No matter in question is related to a regional developer arrangements and will have a noncash impact to the company's financial statements.
I'll review, our clinic comps for Q2, 'twenty three compared to Q2 'twenty two.
System wide sales for all clinics opened for any amount of time increased to $121 million up 13%.
System wide comp sales for all clinics opened 13 months or more increased 5% system wide comp sales for mature clinics opened 48 months or more decreased 1%.
Perfect. This comp reflects fewer than anticipated new patients at some of the more mature clinics.
I can state that at June 32023, our unrestricted cash was $13 $6 million compared to $9 $7 million at December 31, 2022.
For the six months ended June 30th 2023 cash flow from operations was $8 $4 million, including the receipt of the employee retention credits of $4 $8 million in the first quarter.
For the six month period, we invested $4 $7 million in acquiring previously franchise clinics and the rights to an Rd territory.
As well as ongoing greenfield clinics and upgrading existing clinics.
Also we continue to have access to additional cash through our line of credit with Jpmorgan Chase.
To date, we've drawn $2 million and have an additional $18 million available.
Due to the ongoing quarterly review procedures I can't provide financial guidance at this time, however, I can reaffirm our guidance for clinic openings is on track for 2023 franchise clinics. We continue to expect openings to range between 101 hundred 20 compared to a 121 and 2022 and for Greenfield connects we continue to expect to open a range of eight to 12.
<unk> compared to <unk> 16 in 2022, and with that I'll turn the call back over to you Peter.
Thanks, Jake turning to slide 19, with the success of joined National growth with over 900 clinics, we're entering new territory.
With a portfolio of 135 corporate clinics, we've reached the natural stage, where we will continually evaluate unit performance to respond as market and retail environments change. This.
This entails considering selling certain clinics to franchisees closing clinics and are relocating others due to the performance loss of an anchor store of the strip center or changes in the local retail market.
This analysis and execution has been thoughtfully and methodically and especially since we have a talented teams lease obligations and other factors to consider with that said it's important to note that we are exiting certain clinics would be a credit accretive and enable us to devote our key resources to more productive areas.
Also as discussed on previous quarter end conference calls, we're slowing down our Greenfield strategy, we began to fulfill our outstanding lease obligations and then we will pause to assess strategic markets based on economics and demographics.
Further as Jack mentioned, we're also focusing on general and administrative cost cutting initiatives.
Finally, we're implementing tactics to drive new patient acquisition Len.
Let me start by saying our total new patient conversion is still strong at approximately 50% and up from around 45% pre COVID-19.
Also our attrition remains low at around 11% per month compared to the 12% to 13% in recent years.
As such we're focused on increasing new patient leads as noted in my marketing reviewed earlier, we're also building our national brand through digital automated and traditional marketing.
While we're managing as unusual economic environment is critical to understand the underlying market fundamentals remains strong for our business and the drivers of our long term growth of our compelling pain opioid obesity epidemic continue to plague our nation <unk>.
Americans, particularly younger ones, which is our patient base are searching for natural more holistic ways to treat pain and are spending about $19 $5 billion a year on car Practic care.
Our clinics after doctors of car Patrick sustainable path to practice, what they love and leverage our system wide resources like staffing productivity tools and more importantly, marketing the whole system also benefits from frequent educational outreach efforts with associations and schools of carb practice for.
For example, a few weeks back I enjoyed participating in the Texas car Patrick colleges, 115th Homecoming and next week with my team.
With my team, we're headed to the world's largest a bit of chiropractic care the national Convention organized by the Florida Chiropractic Association.
We remain focused on what we control executing programs to improve clinic performance and to reduce G&A for our long term profitable growth.
Core of what we're doing and the impact of our mission to improve quality of life through routine and affordable car Practic care as our garden guiding principle I'd like to thank our community of doctors wellness coordinators franchisees regional developers and employees for their passion and dedication. The team is committed to growing the overall car practic care market educating the.
Tumor about the efficacy of chiropractic, capturing a greater share in enhancing performance all with the goal of fulfilling our mission.
And with that I'm, Jane I'm ready to take the Q&A.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Today's first question comes from Jeremy Hamblin with Craig Hallum Capital Group. Please go ahead.
Thanks.
So I wanted to ask a question about the aligned franchisee Association the F E.
Which is now representing more than 50% of the franchise clinics.
And and just understand a little bit more of the types of engagements that you're having you know with the FAA.
Kind of what are the major discussion point and points of interest from the a S. A and and you know what you can share about how you're working with them to you.
To help build the brand.
Sure Jeremy I'll take that question that the obviously the FAA has formed and.
In any organization they can in a franchise system from time to time, you will see an independent franchise association for them.
We also have our national franchise Advisory Board. This is made up of nine members that are elected to that position and that is our formal form of communication with our franchise community outside of of course, I will take a call from any franchisee.
In our network and so at this point that we really don't have a formal relationship with independent Association.
We believe that the head of the National franchise Advisory Board is the most appropriate form of communication and to address the issues and concerns that the association of the Independent Association has and so that's really kind of the approach that we're taking to this situation.
Okay.
Got it and then you.
We have since it seems like maybe you're limited in what you can discuss on this call are you planning.
Planning to have like a follow up call. After you issue.
You know kind of format results and can you discuss the timeline in which you expect to have.
The matter resolved with the auditors and in a more formal.
There are more full release.
Yeah. Jeremy This is Jay yes, we're disappointed we couldn't released the financial results today are doing to the ongoing quarterly review procedures. You know there was a late question that came up around our regional developer arrangements.
That that's going to have a a noncash impact, but we have some further documentation and procedures to get through to align on that yeah. We know we have a 10-Q filing deadline on Monday, and we are dedicating our resources to adhere to that but yes, we would have an additional press release to release that information.
But are you going to have additional conference call.
We haven't made that determination at this time.
And is it fair to assume that you, though that you would are you.
You know kind.
Kind of definitively be wrapped up with reporting Q2 by the end of the month.
Yeah that is the goal.
To a narrow range of ongoing issues. So you know like I said, we are dedicating all resources too.
To address the issue and get our financial information out there as quickly as possible.
Okay got it thanks good luck.
Thank you. The next question comes from Jeff Van <unk> with B Riley. Please go ahead.
Yes, hi.
Beat a dead horse here, but just maybe if theres anything else you can shed light on related to the issue with your auditors related Giardi, maybe what part of the financials might be impact sort of what is the heart of the issue there.
And you said you're planning to.
The 10-Q by Monday.
Is that right or I'm, a little confused when you get the results out by the end of them.
We know we have a filing deadline, a timely filing deadlines for Monday, and we're doing everything we can to adhere to that timeline.
We do have unresolved issues, although we have to work through.
And so we know the urgency of the information and we're dedicating the resources to get out there.
But yes, I am shooting to hit that filing deadline on Monday, that's absolutely true.
The issue is around our regional developer arrangements. These were.
Transactions that we've entered into in the past.
And our re acquisition that we executed in the quarter.
<unk> also done in the past we use similar.
Accounting treatments that we've used in the past under previous audits.
And Theres a new question that is a reason that we have to work through them and get the documentation together to align.
Aligned with our outside accounting firm.
Okay. So it sounds like and correct me, if I'm wrong here, but it sounds like its really more revolving around the acquisitions in other words, if he would not we acquired in the quarter. This issue probably would not come up with my correct on that.
That's correct, yeah, sometimes when you're all kind of eyes, you get a new set of questions and Oh.
That's why we had this time and we got to make sure we have.
The appropriate documentation in place so that all parties can agree to released the financial information.
Okay got it.
Yeah, absolutely just emphasize it's a noncash issue definitely just to make sure that we are complying with.
Graph gap.
Revenue terms.
Yeah, that's about 100.
The flow of funds will be the same.
It will really just be the GAAP accounting.
Yeah.
<unk> sits behind that.
Okay got it.
And then if you could maybe speak more about your plans for the mature corporate clinics.
I think you highlighted that in the press release, just kind of what the performance has been there and what's the threshold is to close some of them realize you guys have a very low closure rate.
Maybe how many you expect to close I know, it's a tough question now because you'd probably evaluate now.
And then also just kind of as a follow up to that.
Maybe touch a little bit more on the expense reductions you're looking into.
Yeah, great questions.
Kevin we categorize that more of a strategic review.
So I don't have a strategic number or a target that we're shooting for.
We're looking at that and how we're allocating resources and.
Realizing we can be more efficient there and then also just to be clear Jeff that arent.
Aren't always closures that some of them can.
Can be sold to a franchise.
In terms of just looking at our geographical spread so there's a lot of factors there that we're really looking at so that some could be sold will be sold off others will be.
Old others can be relocated.
Mhm mhm.
But the net net that's been interrupted.
Yeah, I don't have I don't have a fixed number for you today Jeff.
We're going through that process, we've identified a number of clinics already that are on kind of our our action item list. If you will so I do expect.
The mix of of corporate and franchise too to shift in accordance with that.
Again, we're going to be methodical with it as we mentioned in the transcript.
Realizing that there's a lot of factors that we have to consider and I'll I'll reiterate Peter's point that.
This is not an immediate closure exercise.
This is potentially a refranchising a portion of that so what we do know is that we still have the vast majority of of our corporate portfolio are profitable unit Oh, we have a good number of units that are still young units. Obviously, we've gone through a pretty significant investing cycle in that space and the fundamentals of the business are still.
Strong.
We're not abandoning the corporate approached by any means this is a kind of a strategic optimization exercise looking for those efficiencies in the portfolio.
And also realizing that we have issues to address and we're going to allocate our resources appropriately.
As far as your G&A question.
That's again, a strategic review as we kind of pull back the scale of our portfolio Theres some natural flow through in trimming that can happen there.
And then also making sure that.
With the level of development, and where we're going to exert our effort that we're finding the efficiencies in our G&A structure and so I think in periods, where we're looking to accelerate the profitability of the company I think it's only prudent to go back in and look at your cost structures and make sure that they're there right size for your organization.
That's the exercise that we're going to take long.
Uh-huh, Okay, and then just as a follow up to that if I could.
Can you tell us the difference in the comps.
Between the corporate owned clinics and the franchise clinics.
Yeah, we don't split that out I think it was less than 1% difference for the second quarter.
So again like we've said historically, we traditionally don't see a large spread between the two just given the model and in some of its simplicity. So.
There's not a material delta there in the second quarter or really in the first quarter, but.
When we have the full economics captured on our P&L.
We just have a more outsized impact to our overall consolidated position just given the.
The economics and the flow through of the corporate universe as a franchise.
Right, but that sort of speaks to if theres only a 1% difference in your overall comp was 5% that suggest that the corporate on clinics are still performing well and comping positive.
Yeah.
Like I said, the fundamentals and the vast majority of our portfolio is still maturing we still have profitable units that are out there I don't want I don't want it to come across that we're doing something drastic here. This is absolutely a strategic review.
We're performing because the fundamentals of the business are still strong.
And then that impact should be accretion. So that's also very positive.
Bottom line.
Bottom line correct.
I appreciate that thanks for taking my questions I'll take the rest offline.
Thanks, Jeff.
Thank you as a reminder to ask a question you May Press Star then one on your telephone keypad.
The next question comes from Thomas <unk> with Maxim Group. Please go ahead.
Hey, guys How're you doing.
So just I know you guys mentioned it briefly on the call, but I just wanted to make sure I have the numbers down because you guys. Just real quick review of some of those kpis should provide us with a.
Specifically, the conversion attrition and retention rates.
Sure that if you look at our system Theres really three fundamental kpis, who really focus on one is there are new patients that we really track that very closely and that that's of course very important source of the revenue for our clinics. The second one is in conversion and so when that new patient comes in do they convert by buying a pack.
<unk> or our membership and what I was saying is that our total conversion so as to whether it was a new patient or existing patient that converts that right now thats running both for franchise and corporate right around 50% and if I compare that in a pre COVID-19 environment that we're running probably somewhere around 44, 45% pre COVID-19 with that number.
And then when we look at attrition I said that it's running roughly around 11% per month actually corporate clinics are running a little better than that I think I'm under 10% and that compares to let's say, 12% to 13% in recent years, So youre seeing again.
An improvement overall in the attrition rate the one area that we're really focused on as I mentioned on the call is in improving our new patient account and that's where that's where the real focus is.
Today and going forward.
Great. Thanks for that color that that sounds like a.
It sounds like things are trending in the right direction. There and then my next question could you provide a little bit more color on our digital marketing campaign out of you guys went over it in the slide just kind of where you're at with that and then maybe touch a little bit more on the on the issues you guys.
Kind of solved with metal.
Sure and then if you look at just our whole new patient strategy basically we have three sources for new patients. One is referral and what that is is an existing patient has a great experience with the doctor and they refer their friends and family to that Doctor and right now about 30% of our new patients are coming directly from referral.
The second an increasingly more important as our digital marketing activity and Theres just a whole range of services that are supported by that both organic and paid search and so right now we've been able to measure that of our new patients the 63% of them at least have some pointed touched us digitally.
And we have a whole series of different programs and evolves over time that we're using and so for example, we've entered a new program or new platform with Tic Toc can I talked about how we started that in four markets. We've expanded to four more markets and we're seeing some really positive results with that.
Meta or what what Facebook is also an important source of new patients for us and what we've found is that we've increased some of that met its been and that has in fact increased the number of leads that have come from that activity. So that's an area. We're also focus we go back a little bit we always spending a lot of time on.
Youtube and as we'd probably pull back a little bit on that and because of what you are finding the 20 <unk> century as marketing changes so quickly and the data that you have to drive your marketing becomes only more and more relevant. So one of the things that we've been finishing up is really updating our research on that whole patient journey you know what.
<unk> is one of the potential patient coming in what's the path. They go what are the messages they need in order to be able to be driven into the clinic and so theres a lot of work has been done with that and then that that research will then guide our marketing activities going forward.
Third source for new patients for us would be what I'm just called out guerrilla marketing activity. That's typical of all small box retail because what you've got to do is educate the consumer.
<unk> travels.
Luke traveled and worked within that 5% to 15 minute radius around that box that you are there when they need your product or service.
All right now, let's say about 25, 30% of our of our new patient count is coming from that time through or the coupon drop or the outreach to the gym or the school or the hospital or whatever it is around that specific clinic, and so thats kind of the.
Overall source of new patients.
Got you I appreciate that color then real quick before I hop back in queue. You guys. You know you mentioned it again also on the call.
You know about some of your staff retention and you briefly mentioned that you guys have any new initiatives.
Two.
Increased staff retention could you guys just provide a little bit more color on where you're at this quarter versus last quarter and how do you guys anticipate that to trend throughout the year. Thank you.
Yes, I think the way I would categorize that as the labor market is still tight.
And for US you know when you have two roles within your clinics. You know you have your doctor in your wellness coordinator each are vitally important to the success of the clinic and what we absolutely know is is its quality doctors is the lifeblood of what we do here and so I think we will always have a strategic initiative focused on the retention.
All of our employees certainly our field employees and so as you go through these economic times, we just have to be critically focused on that and especially as we have the ambitious growth goals that we have you know not only do you need to maintain the workforce that you have today, but also preparing yourself for future growth and I think that's where all the successes in the <unk>.
Initiatives that we've had with the schools and associations is really starting to pay off in and Peter mentioned a couple of those that we have attended or will be attending which is just only improving our position within the chiropractic space that will just help that retention.
And attraction of those doctors going forward.
Awesome. Thank you guys for taking my questions and I'll hop back in queue.
Thank you. The next question comes from George Kelly with Roth.
Please go ahead.
Hey, everybody. Thanks for taking taking my questions and apologies. If these have been asked that was.
I wasn't done the beginning part of your call.
But first on the strategic review process on the owned portfolio.
I was curious.
Could this very well I mean that is the entire portfolio kind of up to review and could this lead to.
Sale of most of the units there and then the second question on the same topic is what is the four wall EBITDA of that portfolio.
Yeah No. The strategic review is just that this is not a wholesale review of the portfolio. These are you know specific targeted clinics that are.
Either in.
Unique geographic areas, we've seen market dynamics change within the specific clinic.
The markets that they're operating in or Theyre underperforming that could be part of that subset.
We only have a handful of unprofitable clinics and certainly those are ones that you you critically pay attention to but this is not an indication that we're exiting our corporate strategy. This will be a smaller strategic review and really trying to optimize the portfolio that we have if you look at the overall profitability of the unit.
You know those as a whole we're still seeing profitability into the 20% and then we have the outside the four wall bleed.
That brings it down above that so we'll be excited to release those full financial results.
I can get you an update by segment. So you can see how those are trending we have seen sequential improvement quarter over quarter and the profitability of the units.
So again this is not a wholesale exit this is a strategic review of a subset of clinics.
Because really we understand the importance of profitability in this environment and.
And we know that that.
<unk> is affected by the performance of our corporate portfolio was affected by the outside the four ball G&A, we have and the associated unallocated G&A that we have in the system and that's why we're going to take a strategic look.
And all of those to try to drive profitability into this organization moving forward, yes, it's a refinement not a change in policy.
Okay, then I guess I'm a bit surprised it it's gotten a lot of attention in the part of the call that I have listened to it in your press release, I mean isn't that a normal course of business what what's unique here about the review it I would think that you are always doing status checks on your locations. So maybe I'm off their books.
Well I guess, what this seems like Georgia.
The point, you're making is correct I mean us as an organization we should be doing this every day and we do do that and I think again part of this is just.
I will say that we that we've more than doubled the size of our portfolio over a relatively short period of time and so much of that focus really was on the increasing of the portfolio that as opposed to maybe a little more attention on kind of the.
The existing portfolio and what we need to do with that and so it's really just recognizing us as the portfolio grows in size and importance to the company that we've got to be much more focused on and that's really what we're saying.
Okay. Okay, and then second question is on <unk>.
Guidance did you provide any kind of update on your full year guidance.
No I can't give the financial metrics at this time, we certainly will update that but we did do the openings guidance and reaffirmed the range for both franchise openings and the corporate Greenfields.
Okay, Great and then last question for me is back to the cost savings and strategic review and everything.
Is that the cost savings initiatives that you are.
Sort of targeting <unk>.
Also outside of your own portfolio and set a different way I look at your G&A, the unallocated corporate overhead and Theres been a lot of increase in that line in the last two or three years and I'm curious if you're kind of looking at some of that and there could be savings there as well and that's all I had thank you.
Yes that is part of the of the review and stepping back and looking at the overall infrastructure and G&A run rate in that unallocated bucket and doing what we can to optimize and reduce that run rate on a go forward basis.
We're striving for leverage and profitability and so we're going to do what we need to do to get there.
Okay, I'm, sorry, I guess I have one more but when do you expect to conclude this process is this something we could start to sort of see play through by year end.
Yeah, we are where we have started now and will continue to go through that exercise you know as of right now where we're absolutely in the throes of a strategic planning for 2024 and beyond.
I will quickly align on our budgeting strategies for for a go forward basis. So these are absolutely active discussions that we're having right now that all.
Some of them were able to put in place now and then we'll look at what we can further find efficiency and as we as we move forward. So I would say both and I would say there is not a definitive timeline other than this is going to be an ongoing strategic focus for us.
Okay. Thanks.
Thank you.
As a reminder to ask a question you May Press Star then one on your telephone keypad.
Yeah.
Seeing no further questions. So I'd now like to turn the call back over to Peter Holt for closing remarks.
Thank you Jay before I close I'd like to note that we'll be in New York City on September 14th presenting in conducting meetings at the Lake Street capital markets Big Seven conference and the B Riley Securities Consumer Conference.
Our patients storage today comes from Melanie a marine Corps veteran during her service Melanie would participate in our training and opposite left it up to 30 hours often while carrying a significant amount of gear. She suffered lower back upper back and neck injuries, which left her with debilitating chronic pain seeking pain relief in 2017, Melonie joined the joint and got into a full <unk>.
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Yeah.
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Yeah.
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