Q1 2024 The Joint Corp Earnings Call

May 2, 2024

Good day, and welcome took a drink great.

Lysen Onlimode: Good day and welcome to the joint group. First Quarter 2024 Financial Results Conference Call. All participants, I am Lysen Onlimode.

Corp, first quarter of 'twenty 'twenty four financial results conference call.

Speaker Change: All participants I'm mistaken may not should you need assistance. Please signal a conference specialist by pressing the star keep on it.

Lysen Onlimode: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. You may press star then 1 on a touch-tone phone.

Speaker Change: After today's presentation there'll be an opportunity to ask questions.

You May question why have been one on a touchtone thought crypto.

Lysen Onlimode: To withdraw your questions, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to David Barnard with LHS Investor Relations. Please go ahead.

Speaker Change: Your question. Please press Star then two.

This event is being recorded I would now.

Now I'd like to turn the conference over to David Benoit.

David Benoit: Jack <unk> Investor Relations. Please go ahead.

David Benoit: Thank you Katie good afternoon, everyone. This is David Barnard of La <unk> Investor Relations joining us on the call today are president and CEO, Peter Holt and CFO Jake Singleton.

David Barnard: Thank you, Kaylee. Good afternoon, everyone. This is David Barnard of LHA Investor Relations. Joining us on the call today are President and CEO Peter Holt and CFO Jake Singleton. Please note we're using a slide presentation that can be found at https://ir.thejoint.com under events. Today, after the close of market, the joint corporation issued its results for the quarter ended March 31 2024.

David Benoit: Please note we're using a slide presentation that can be found at https, IR dot to joint Dot com under events.

David Barnard: If you do not already have a copy of the press release, it can be found in the investor relations section of the company's website. As provided on slide two, please be advised that today's discussion includes forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1994. All statements, other than statements of historical facts, may be considered forward-looking statements. Although the company believes that the expectations and assumptions reflected in these forward-looking statements are reasonable, it can make no assurances that such expectations or assumptions will prove to have been correct. Actual results may differ materially from those expressed or implied in forward-looking statements due to various risks and uncertainties. As a result, we caution you against placing undue reliance on these four looking states.

David Benoit: Today after the close of market. The joint Corp issued its results for the quarter ended March 31 2024.

David Benoit: <unk> already have a copy of the press release it can be found in the Investor Relations section of the company's website.

David Barnard: For a discussion of the risks and uncertainties that could cause actual results to differ from those expressed or implied in the forward-looking statements, please review the risk factors detailed in the company's reports on Forms 10-K and 10-Q, as well as other reports that the company files from time to time with the SEC. Finally, any forward-looking statements included in this earnings call are made only as of the date of this call, and we do not take any obligation to revise our results or publicly release any updates to these forward-looking statements in light of new information or future events. Management uses EBITDA and adjusted EBITDA, which are non-GAAP financial measures.

David Benoit: As provided on slide two please be advised that today's discussion includes forward looking statements within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

David Barnard: These are presented because they are important measures used by management to assess financial performance. Management believes they provide a more transparent view of the company's underlying operating performance and operating trends than GAAP measures alone. Reconciliation of net income to EBITDA and adjusted EBITDA is presented in the press through the following the company defines EBITDA as net income or loss before net interest, tax expense, depreciation, and amortization.

David Barnard: The company defines adjusted EBITDA as EBITDA before acquisition-related expenses, which includes contract termination costs associated with reacquired regional developer rights and stock base compensation. Bargain Purchase Gain, Net Gain or Loss on Disposition or Impairment, Costs Related to Restatement Filings, Restructuring Costs, and Other Income Related to the Employee Retention Credit. Management also includes commonly discussed performance metrics. System-wide sales include revenues at all clinics, whether operated by the company or by franchisees. While franchise sales are not recorded as revenues by the company, management believes the information is important in understanding the company's financial performance. Because these sales are the basis on which a company calculates and records royalty fees and are indicative of the financial health of the franchisee's business.

David Benoit: All statements other than statements of historical facts may be considered forward looking statements. Although the company believes that the expectations and assumptions reflected in these forward looking statements are reasonable it can make no assurances that such expectations or assumptions will prove to have been correct. Actual results may differ materially from those expressed.

David Benoit: Rest or implied in forward looking statements due to various risks and uncertainties. As a result, we caution you against placing undue reliance on these forward looking statements for a discussion of the risks and uncertainties that could cause actual results to differ from those expressed or implied in the forward looking statements. Please review the risk factors detailed in the Companys reports on forms 10.

Peter D. Holt: System-wide comp sales include the revenues from both company-owned or managed clinics and franchise clinics that, in each case, have been open at least 13 full months and exclude any clinics that have, Turning to slide three, it's my pleasure to turn the call over to Peter Holt. Thank you, David, and I welcome everybody to the call. The Joint is revolutionizing access to chiropractic care by providing affordable, concierge-style, membership-based services in convenient retail settings.

Peter D. Holt: We began 2024 with a vision to be the champions of chiropractic, and we focused on increasing new patient counts, improving existing patient engagement, and positioning to re-franchise the vast majority of our corporate portfolio, and we're making solid progress. Additionally, during the first quarter, we grew revenue, improved the bottom line, and tripled our franchise sales sequentially. Turn to slide four.

David Benoit: 10-K, and 10-Q as well as other reports the company files from time to time with the SEC.

David Benoit: Finally, any forward looking statements included in this earnings call are made only as of the date of this call and we do not take any obligation to revise our results or publicly release any updates to these forward looking statements in light of new information or future events.

Management uses EBITDA and adjusted EBITDA, which are non-GAAP financial measures. These are presented because they 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 reconciliation of net income to EBITDA.

David Benoit: 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.

David Benoit: The company defines adjusted EBITDA as EBITDA before acquisition related expenses, which includes contract termination costs associated with reacquired regional developer rights stock based compensation.

David Benoit: Oregon purchase gain net gain or loss on disposition or impairment costs related to restatement filings restructuring costs and other income related to the employee retention credits.

David Benoit: Management also includes commonly discussed performance metrics systemwide sales include revenues at all clinics, whether operated by the company or by franchisees. Our franchise sales are not recorded as revenues by the company management believes the information is important in understanding the company's financial performance. Because these sales are the basis on which the comp.

David Benoit: Calculate some records royalty fees and are indicative of the financial health of the franchisee base.

David Benoit: Some wide comp sales include the revenues from both company owned or managed clinics and franchise clinics and in each case have been opened at least 13 four months and excludes any clinics that have closed turning to slide three its my pleasure to turn the call over to Peter Holt.

Peter D. Holt: I'll review the first quarter of 2024 compared to the same period in 2023. System-wide sales grew to $126.3 million, increasing 9%. System-wide comp sales for clinics that have been open for at least a full 13 months increased 3%, while revenue increased 5%. Adjusted EBITDA was $3.5 million for Q1 2024, up 74% over the same period last year. On March 31, 2024, our unrestricted cash was $18.7 million, compared to $18.2 million at December 31, 2023.

Peter D. Holt: Thank you, David and I welcome everybody to the call. The joint is revolutionizing access to car Practic care by providing affordable concierge style membership based services and convenient retail settings.

Peter D. Holt: Turning to slide five, I'll discuss our clinic metrics. We opened 23 franchise clinics and closed four in the first quarter of 2024, compared to 29 franchise clinics opened and one closed in the first quarter of 2023. At March 31, 2024, our total clinic count reached 954 units, consisting of 819 franchised and 135 corporate, up from 935 opened clinics, 800 of which were franchised, at the end of the year 2023

Peter D. Holt: The clinic portfolio mix remains 86% franchised and 14% company owned or managed, and although it's expected to shift during the year as we execute our re-franchising strategy. Turning to slide six, we're focused on re-franchising as our primary initiative in 2024. As discussed, we received over 100 requests for information and have been vetting the opportunities to identify the most effective franchisees.

Peter D. Holt: We're going through a structured process to continue to conduct negotiations with multiple qualified franchisees in regard to the sales of our corporate clinics. There's been a strong interest in larger transactions. As these are more complex, we've identified an investment bank specializing in re-franchizing to help.

Peter D. Holt: We began 2024 with a vision to be the champions of car Practic and we focused on increasing new patient counts improving existing patient engagement and positioning to re franchise. The vast majority of our corporate portfolio.

Peter D. Holt: Working together, we expect to ensure we re-franchise to the best of our franchisees, accelerate the process, and create value for all of our stakeholders. We are well on our way to generating capital to be reinvested in the brand, marketing, RD territory acquisitions, and or stock repurchases, among other options. Turning to slide 7, I'll review our franchise license sale. During Q1, we sold 15 franchise licenses compared to 17 in Q1 2023. Of the licenses sold, 87% of the franchisees were new to the joint.

David Benoit: And we're making solid progress.

David Benoit: Additionally, during the first quarter, we grew revenue improve the bottom line and tripled our franchise sales sequentially.

David Benoit: Turning to slide four I'll review, the first quarter of 2024 compared to the same period of 2023.

Peter D. Holt: This reflects investment and validation of our franchise concept. Q1 2024 tripled sales compared to Q4 2023, a solid increase given the ongoing high interest rates, inflation, and strong employment. I do want to note that franchise sales may also be impacted by our re-franchising strategy. On March 31, 2024, we had 166 franchise licenses in active development, as well as 17 regional developers with an aggregate 10-year minimum development schedule for 674 clinics. We do not plan to establish any new additional regional territories and will consider opportunities to require additional territories as the RD territories mature.

Peter D. Holt: Turning to slide 8, all of you are marking a. In Q1, we conducted our annual patient survey, which provided great insights into our brand perception. We're proud of the results of the survey and remain committed to doing even better. First, the Joint continues to demonstrate our ability to grow the market with 36% of our patients being new to chiropractic in 2023. Next, patients gave the Joint a strong Net Promoter Score of 64%, and an amazing 92% of patients with prior chiropractic experience rated the Joint as better or as equal to the previous care they'd received.

David Benoit: System wide sales grew to $126 3 million increasing 9%.

David Benoit: System wide comp sales for clinics that have been opened for at least a full 13 months increased 3%.

David Benoit: Revenue increased 5%.

David Benoit: Adjusted EBITDA was $3 5 million for Q1, 2024 up 74% over the same period last year.

David Benoit: On March 31, 2024, our unrestricted cash was $18 7 million.

David Benoit: Compared to $18 2 million at December 31, 2023.

Speaker Change: Turning to slide five I'll discuss our clinic metrics.

David Benoit: We opened 23 franchise clinics and closed four in the first quarter of 2024 compared to 29 franchise clinics opened and one closed in the first quarter of 2023.

David Benoit: At March 31, 2024, our total clinic count reached 954 units consisting of 819 franchised and 135 corporate up from 935 opened clinics 800 of which were franchise at the end of the year of 2023.

David Benoit: The credit portfolio mix remains 86% franchised and 14% company owned or managed and although it is expected to shift during the year as we execute our refranchising strategy.

David Benoit: Turning to slide six we're focused on Refranchising strategy as our primary initiative in 2024.

David Benoit: As discussed we received over 100 requests for information that are embedded in the opportunities to identify the most effective franchisees.

David Benoit: We're going through a structured process to continue to conduct negotiations with multiple qualified franchisees.

David Benoit: And with regards to the sales of our corporate clinics.

David Benoit: There's been a strong interest in larger transactions as these more as these are more complex we've identified in the investment bank specializing in refranchising to help us.

David Benoit: Working together, we expect to ensure we re franchise through the rest of our franchisees accelerate the process and create value for all of our stakeholders.

David Benoit: We are well on our way to generating capital to be reinvested in brand marketing Rd territory acquisition, and our stock repurchases among other options.

David Benoit: Turning to slide seven I'll review, our franchise license sales.

David Benoit: During Q1, we sold 15 franchise licenses compared to <unk> 17 in Q1 2023.

David Benoit: The licenses sold 87% of the franchisees were new to the joined.

David Benoit: This reflects the investment in validation of our franchise concept.

David Benoit: Q1, 2024 tripled sales compared to Q4 of 2023, a solid increase giving us ongoing given the ongoing high interest rates inflation and strong employment.

David Benoit: I do want to note that franchise sales may also be in part impacted by our Refranchising strategy.

David Benoit: On March 31, 2024, we had 166 life franchise licenses enacted development as well as 17 regional developers with an aggregate 10 minimum 10 year minimum development schedule for 674 clinics.

David Benoit: We do not plan to establish any new additional original territories, and we will consider opportunities to require territories as the Rd territories mature.

David Benoit: Turning to slide eight I'll review, our marketing efforts and.

David Benoit: In Q1, we conducted our annual patient survey, which provided greater insight into our brand perception.

David Benoit: We're proud of the results of the survey.

David Benoit: <unk> committed to doing even better.

David Benoit: First the joint continues to demonstrate our ability to grow the market with 36% of our patients being new to chiropractic in 2023.

David Benoit: Next patients gave the joined to strong net promoter score of 64%.

David Benoit: And an amazing 92% of patients with prior car Practic experience really the joint is better or is equal to the previous care that received.

David Benoit: Additionally, research led us to redirect some of our marketing resources from older campaigns, New social media Influencer efforts.

Peter D. Holt: Additionally, research led us to redirect some of our marketing resources from older campaigns to new social media influencer efforts. With strong positive perceptions from consumers new and not new to chiropractic, as well as our existing patients, our data indicates that the biggest opportunity is to drive awareness of chiropractic care in general and consideration of the joint in particular. In light of this data, we've made a strategic decision to forego our in-clinic new patient contest this past March to invest in driving consideration in April. We're doing that by evolving our to-go markets approach at all levels of the marketing funnel. At the top of the funnel, we introduced social media influencers last month.

David Benoit: With strong positive reception from consumers, new and not new to car practic as well as our existing patients. Our data indicates that the biggest opportunity is to drive awareness of chiropractic care in general and consideration of the joint in particular.

David Benoit: In light of this data we've made a strategic decision to forgo our in clinic, new patient contest. This past March to invest in driving consideration in April.

David Benoit: We're doing that through evolving are to grow markets approach at all levels of the marketing funnel.

David Benoit: At the top of the funnel, we've introduced social media Influencers last month.

Peter D. Holt: Our lineup features both health and wellness as well as athlete influencers, including Sherry Hawkins, U.S. track and field Olympian. We're partnering with these influencers to reach their broad audiences as well as to showcase the benefits of chiropractic care in a relevant way. In addition, several co-ops will feature regional influencers to support the national campaign, driving consideration in their local markets by leveraging relevant personalities.

David Benoit: Our lineup features both health and wellness as well as athlete influencers, including Sherry Hawkins U S track and field Olympian.

David Benoit: We're partnering with these influences to drop to reach their broad audiences as well as the showcase the benefits of chiropractic care in a relevant way.

David Benoit: In addition, several co ops will feature regional Influencers Influencers to support the National campaign driving consideration in their local market by leveraging relevant personality.

Peter D. Holt: We're also testing a variety of new promotions, channels, and tactics in our co-ops to better optimize our promotions and media mix based on the market and the patient base. In Q1, we will continue testing digital initiatives with our patient experience roadmap. We're seeing success in driving new patients in our initial visit bookings test by providing the opportunity for new patients to book an appointment to complete their initial exam and visit. Patients who have participated indicated that the booking was a positive experience and important to their choosing a joint.

David Benoit: We're also testing a variety of new promotions channels and tactics and our co ops to better optimize our promotions and media mix based upon the market and the patient base.

David Benoit: In Q1, we continued testing digital initiatives with our patient experience roadmap.

David Benoit: We're seeing success in driving new patients in our initial visit bookings test by providing the opportunity for new patients to book an appointment to complete their initial examine visit.

David Benoit: Patients who have participated indicated that the booking was a positive experience and important to their choosing the joined.

Peter D. Holt: We've also made progress in replacing our patient paper intake forms with an enhanced digital intake process, and we are now in the next phase of testing before our rollout. Finally, the team is hard at work creating stronger local store marketing tools. Working with the development team and leveraging the wealth of data that we have about our patients, we're implementing a clinic segmentation strategy to provide more effective local store marketing programs. And with that, Jake, I'll turn it over to you.

David Benoit: We've also made progress in replacing our patient paper intake forms with an enhanced digital intake process and are now in the next phase of rollout before the next phase of testing before a rollout.

David Benoit: Finally, the team is hard at work in creating stronger local store marketing tools working with a development team and leveraging the wealth of data that we have about our patients. We're implementing a clinic segmentation strategy to provide more effective local store marketing program.

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

Jake Singleton: Thanks, Peter and let's turn to slide nine.

Jake Singleton: Thanks, Peter. And let's turn to Slide 9. I'll review our clinic comps for Q1 2024 compared to Q1 2023. System-wide sales for all clinics open for any amount of time increased to $126.3 million, up 9%; system-wide comp sales for all clinics open 13 months increased 3%; system-wide comp sales for mature clinics open 48 months or more decreased 3%.

Jake Singleton: I will review our clinic comps for Q1 2024 compared to Q1 2023.

Jake Singleton: System wide sales for all clinics opened for any amount of time increased to $126 3 million up 9%.

Jake Singleton: System wide comp sales for all clinics opened 13 months increased 3%.

Jake Singleton: System wide comp sales for mature clinics opened 48 months or more decreased 3%.

Jake Singleton: Revenue was $29.7 million, up $1.4 million, or 5%. Revenue from franchised operations increased 9%, contributing $12.2 million. Company-owned or managed clinic revenue increased 2%, contributing $17.5 million. The increases represent continued year-over-year growth in both the franchise base and the corporate portfolio. The cost of revenues was $2.7 million, up 10% over the same period last year, reflecting the associated higher regional developer royalties and commissions. Selling and marketing expenses were $3.9 million, down 7% year over year, reflecting the timing of the advertising spent.

Jake Singleton: Revenue was $29 7 million up $1 4 million or 5%.

Jake Singleton: Revenue from franchise operations increased 9% contributing contributing $12 2 million.

Jake Singleton: Depreciation and amortization expenses decreased $811,000, or 37%, compared to the prior year period, reflecting the accounting for corporate clinics that are being held for sale as part of the re-franchising effort. G&A expenses were $20.3 million, up only 1% compared to the same period last year, reflecting the lower rent for corporate clinics held for sale as well as the continued cost control initiatives offsetting the majority of increased expenses to support Loss on disposition or impairment was $362,000.

Jake Singleton: Company owned or managed clinic revenue increased 2% contributing $17 5 million.

Jake Singleton: The increases represent continued year over year growth in both the franchise base in the corporate portfolio.

Jake Singleton: Cost of revenues was $2 7 million up 10% over the same period last year, reflecting the associated higher regional developer royalties and commissions.

Jake Singleton: Selling and marketing expenses were $3 9 million down.

Jake Singleton: <unk>, 7% year over year, reflecting the timing of the advertising spend.

Jake Singleton: Depreciation and amortization amortization expenses decreased $811000 or <unk>, 37%.

Jake Singleton: Compared to the prior year period, reflecting the accounting for corporate clinics that are being held for sale as part of the Refranchising efforts.

Jake Singleton: G&A expenses were $23 million up only 1% compared to the same period last year.

Jake Singleton: Selecting the lower rent for corporate clinics held for sale as well as the continued cost control initiatives offsetting the majority of increased expense to support more clinics.

Jake Singleton: Loss on disposition or impairment was $362000 related to the ongoing quarterly impairment analysis of clinics held for sale as part of the Refranchising efforts this compared to $65000 in Q1 2023.

Jake Singleton: Related to the ongoing quarterly impairment analysis of clinics held for sale is part of the re-franchising effort. This compared to $65,000 in Q1 2023. Operating income was $1.1 million compared to an operating loss of $653,000 in Q1 2023. Other income was $35,000 compared to $3.8 million in Q1'23, which reflected the receipt of employee retention credits in the year-ago period. Income tax expense was $179,000 compared to $841,000 in Q1'23.

Jake Singleton: Operating income was $1 $1 million.

Jake Singleton: Compared to operating loss of $653000 in Q1 2023.

Jake Singleton: Other income was $35000 compared to $3 8 million in Q1, 'twenty, three which reflected the receipt of employee retention credits in the year ago period.

Jake Singleton: Income tax expense was $179000 compared to $841000 in Q1 'twenty three.

Jake Singleton: Net income was $947,000, or $0.06 per diluted share, compared to net income of $2.3 million, including the aforementioned employee retention credits received in Q1 2023, or $0.16 per diluted share. Adjusted EBITDA was $3.5 million, up 74% from $2 million in Q1 2023. Franchise clinic-adjusted EBITDA was up 15% at $5.6 million. Company-owned or managed clinic-adjusted EBITDA, reflecting the aforementioned accounting for rent expense related to the clinics held for sale, increased 94% to $3.1 million. Corporate expense as a component of adjusted EBITDA was $5.1 million.

Jake Singleton: Net income was $947000 or <unk> <unk> per diluted share compared to net income of $2 $3 million, including the aforementioned employee retention credits received in Q1, 2023, or <unk> 16 per diluted share adjusted.

Adjusted EBITDA was $3 5 million up 74% from $2 million in Q1 2023 franchise.

Jake Singleton: Franchise clinic adjusted EBITDA was 15 was up 15% at $5 $6 million company owned or managed clinic adjusted EBITDA, reflecting the aforementioned accounting for rent expense related to the clinics held for sale increased 94% to $3 1 million.

Jake Singleton: Corporate expense is a component of adjusted EBITDA was $5 $1.738 million higher than Q1, 'twenty three related to higher legal and accounting and greater professional services related to our refranchising efforts and it maintenance.

Jake Singleton: $738,000 higher than Q123, related to higher legal and accounting fees and greater professional services related to our re-franchising efforts and IT maintenance. Now, on to a review of our balance sheet and cash flow. At March 31st, 2024, our unrestricted cash was $18.7 million, compared to $18.2 million at December 31st, 2023; cash flow from operations was partially offset by the $2 million repayment of the line of credit to JPMorgan Chase.

Jake Singleton: Onto a review of our balance sheet and cash flow at March 31, 2024, our unrestricted cash was $18 $7 million.

Jake Singleton: Compared to $18 2 million at December 31, 2023.

Jake Singleton: Cash flow from operations was partially offset by the $2 million repayment of the line of credit to JP Morgan Chase.

Jake Singleton: Through this facility, we retained immediate access to $20 million through February 2027. Moving on to slide 10, we are reiterating all elements of our guidance. System-wide sales are expected to be between $530 million and $545 million, compared to $488 million in 2023. System-wide comp sales for all clinics open 13 months or more are expected to increase in the mid-single digits compared to an increase of 4% in 2023. New franchise clinic openings, excluding the impact of refranchised clinics, are expected to be between 60 and 75, compared to 104 in 2023, with the difference reflecting the impact of our refranchising efforts. And with that, I'll turn the call back over to you, Peter. Thanks, Jake.

Jake Singleton: Through this facility, we retain immediate access to $20 million through February 2027.

Peter: Onto slide 10, we are reiterating all elements of our guidance.

Jake Singleton: System wide comp sales for all clinics opened 13 months or more are expected to increase in the mid single digits compared to an increase of 4% in 2023.

Peter D. Holt: Turning to slide 11. At this point, the Joint, we're committed to continually improving our brand, our people, and our performance to truly be the champion of chiropractic care. As I discussed earlier, our revitalized co-ops and digital marketing programs are positioned to drive brand awareness, as well as enhance our performance by furthering our objectives to increase new patient counts and improve existing patient engagement. Additionally, we continue to identify potential adjunct products and services that patients want and have a viable business.

Peter: Thanks, Jake turning to slide 11 at this point the joint we're committed to continually improving our brand our people and our performance to truly be the champion of car Practic care.

Peter D. Holt: As I discussed earlier, our revitalized co ops and digital marketing programs are positioned to drive brand awareness as well as enhance our performance by furthering our objective is to increase new patient counts and improve existing patient engagement.

Peter D. Holt: Additionally, we continue to identify potential edge of products and services that patients want and have a viable business case.

Peter D. Holt: Our goal is to build brand equity and generate incremental revenue streams for all of our people. Regarding people, one of the ways in which we support our existing team of doctors at chiropractic is by providing continuing education. We also empower the next generation of VCs in a variety of ways. As a part of our ongoing effort to educate the chiropractic community about the advantages of the joint offers patients, we've increased our interactions with chiropractic universities. In addition to participating in job fairs, we supported the schools with scholarships and donations to key chiropractic colleges such as Life, Palmer, Parker, Sherman, Texas Chiropractic College, and Life West.

Peter D. Holt: Additionally, last month we announced our first endowment, the Joint Chiropractic Endowed Scholarship for Logan University. This is another way to support the profession and the greater community, enhance our relationships with the schools, invest in the future of graduating doctors at Logan University, and fuel the growth of our future pool of D.C. The quarter of a million dollar endowment scholarship will provide much-needed tuition assistance for generations of students, awarding $10,000 annually to a student who demonstrates academic achievement and a passion for chiropractic and quality patient care.

Peter D. Holt: We also have our preceptorship program. We found that most chiropractic students and new graduates want to learn more about owning and operating a practice. We developed a learning path that combines real patient and business experience while students are building their clinical skills. The program has two components, patient care completed under the supervision of joint preceptors in the clinics and 18 online training modules covering advanced clinical business and self-development topics such as goal setting, business planning, and creating an enhanced patient experience. These classes are presented by joint subject matter experts, as well as clinical experts in the chiropractic field.

Peter D. Holt: In summary, in 2024, we stay focused on the refranchising of our corporate portfolio, fostering our strong franchise base, and improving clinic economics and increasing productivity. Before I begin questions, I'd like to invite you to meet with us at the B. Reilly 24th Annual Institutional Investor Conference later this month and the Oppenheimer 24th Annual Consumer Growth and E-Commerce Conference in June. And with that, Kayleigh, I'm ready to begin 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 touch-tone phone.

Kaylee: If you are using a speakerphone, please pick up the handset to ask your question. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Hey everyone, thanks for taking my questions. Hey George.

George Arthur Kelly: Hey Peter, maybe we could start on comp gross. A couple questions on that topic. I was curious what you've seen so far in Q2, and then secondly, what gives you confidence that you can achieve a mid-single-digit percent comp growth rate that you mentioned as your target for this fiscal year? Sure.

Peter D. Holt: I think that to answer the first part of that question is... No, the first part of that question was, what are we seeing in Q2? What are we seeing in Q2? And I would say that, typically, we're not commenting too much on future clinics, but you know, we obviously had a 3% increase in Q1. We have been talking about how we're cautiously optimistic as we reflect on 2024 performance. And I would say that, as we think, as we look forward, that's certainly what we're expecting. And the second part of that question is, why would you expect that?

Peter D. Holt: And I think that's really because we're continually focusing on the biggest challenge I think we've faced in the last couple of years is that drop in new patient counts. And I think we've got some great programs taking place that will really help us address that issue to bring those new patients in. And when we look at those three metrics that govern our concepts, you know, the new patient count, the conversion, and nutrition, we're continually seeing positive results on our conversion and our nutrition. Our patients are staying with us longer.

Peter D. Holt: If you look at our new patient count for Q1, it was down 3% compared to the same period last year. But I think that was also related to just the challenges of March, because March had five Sundays in it.

Peter D. Holt: One of those Sundays was Easter, and we also stopped our new patient program, our promotion that we ran last year that we did not run this year. So I think that hit that number a little bit for that last month. But I think looking at what we have, these programs that we're putting in place, our influencers, I think I feel very good that we'll be able to see an improvement in that new patient count, which is so important for us and for our cause. Okay, that's helpful.

Peter D. Holt: And then Peter, you mentioned in your prepared remarks that you are sort of assessing different products or services that might potentially work with the model. And in the past, you've talked about perhaps taking a little pricing on some of your oldest legacy members that are in much lower price points. I'm curious if either of those initiatives are contemplated in that mid-single-digit comp guidance. And if they're not, even still, are there things you might put in place later this year?

Peter D. Holt: The answer is yes, that we could get some of them put in place this year, probably towards the end of the year. Because if we're talking about any kind of changing our grandfathering policy or any price increases, there's going to be some testing involved with that before we were to implement a program like that, but that is possible.

Peter D. Holt: And the same with the idea of any kind of ancillary product or service that we would add to the clinics. And we certainly are looking for ways to do that. But we want to be very thoughtful about that. We want to make sure that what we're adding is, you know, creative to the bottom line and not creating complexity in the business model that is not necessary. So we're still in the early stages of identifying the different programs that we can put in place to increase those sales through those additional products and services.

Peter D. Holt: So more to come on that, as we already have, we've designed our kind of a committee that's looking through that to help us make those good decisions. And the final part of that answer is, no; our guidance on the comps did not include or take into account any change in the pricing structure or additional products or services that would be sold in the clinic in 2024. Okay, I appreciate it. I'll hop back in the queue.

Jake Singleton: The guidance on the on the comps did not and do not include or take into account any change in the pricing structure, our additional products or services that would be sold in the clinic in 2024.

Jake Singleton: Okay.

Speaker Change: Appreciate it I'll hop back in the queue.

Speaker Change: Thank you.

Jake Singleton: Joe.

Anthony V. Vendetti: Your question comes from Anthony Vendetti with Max. Thank you. So just a couple quick questions here. So the clinics, you use same-store sales at 13 months, those are up around 3%, but the ones open about four years are down. What do you think that's attributed to? Is that sort of a leveling off?

Peter D. Holt: From Anthony Vendetti with Maxim Group.

Speaker Change: Thank you.

Anthony V. Vendetti: And then maybe just a little bit into the reasoning in general for the closures. I mean, this quarter you had four. I guess the quarter last year was one. You know, do you wait to see how, you know, if the ones that are down, are you looking at revenue trends and profitability or just profitability? How do you look at those in terms of closure? And then I'll have a couple of the following.

Anthony V. Vendetti: So just a couple of quick questions here.

Anthony V. Vendetti: So the clinics your same store sales at 13 months those are up around 3%.

Anthony V. Vendetti: But the ones open about four years or down.

Anthony V. Vendetti: What what do you think that's attributed to that.

Anthony V. Vendetti: Sort of a leveling off.

Anthony V. Vendetti: In general.

Anthony V. Vendetti: This quarter you had for I guess quarter last year was one.

Anthony V. Vendetti: The ones that are down or are you looking at revenue trends and profitability or just profitability. How do you look at those in terms of in terms of the closures.

Speaker Change: And then I have a couple of follow ups.

Peter D. Holt: Okay, to specifically, you know, speak to the closures that yes, we have foreclosures this year. And that again, for a system of our size, nearly 1000 units, you know, foreclosures, even in one quarter. Unbelievably low number of closures, and what's going to happen as your system matures, you've got situations where the market itself is changing, so they may lose an anchor where they've been located, or you have demographics of that market fundamentally changing, which just does not justify that clinic staying open.

Speaker Change: Okay to specifically speak to the closures.

Peter D. Holt: Yes, we have four closings this year and that again for a system of our size nearly 1000 units foreclosures dealing in one quarter is still.

Peter D. Holt: Unbelievably low number.

Peter D. Holt: And what's going to happen is your system matures, you've got situations, where the market itself is changing so they may lose an anchor where they've been located or you have demographics of that market fundamentally change, which just does not justify that clinic staying open.

Peter D. Holt: From time to time, you also have just some personal issues that come up that force a franchise to close a clinic, so I'm not concerned if I compare, okay, one unit closed in Q3 or Q1 2023 compared to the four closures in Q1 2024, but it's something that we look at very carefully. And certainly, the other part of that question is looking at what our concern is, is it top-line revenue, is it profitability of the clinic? And the answer, of course, is both.

Peter D. Holt: That we want to make sure that we are continually looking at ways to increase the profitability of that unit because, what I can tell you, in any system I've ever worked with in franchising, unit economics is one of the most important things that you have to stay focused on. And you have a couple of things you can do to influence that. One is to increase revenue, and the other is to reduce costs. So those are the areas that we're focusing on right now.

Peter D. Holt: Now, we know that, and we've talked a lot about this in the past, that when we look at the margins of our clinics, one of the challenges we've been facing is the increased cost of our labor, and specifically our doctors, and that's suppressed the margins. And so now we're looking at ways to increase that margin. One of the things we did on March 22, we did a price increase across the board, and one of the main reasons for that was to help address this issue of the increased costs of violence.

Peter D. Holt: We're now looking at ways to be more streamlined in the clinic experience itself. And so we spend a lot of time always focusing on that new patient count. But what we're recognizing is that we can do, you know, this is with our new CMO, is that we can also focus on our existing patients and our last patients. And so, with our existing patients, to make sure they're staying with us longer, and with our last patients, to make sure they come in earlier.

Peter D. Holt: And so we feel there are some opportunities there with some of the marketing materials we're having and some automated marketing programs that we can influence those decisions about how long our patients stay with us and how quickly they can come back. Okay, just on the 48 month, Peter, you know how many of your clinics are, you know, four years or older, and then the aggregate, I guess they're down 3% in terms of revenue. You know, what do you attribute that to?

Peter D. Holt: Well, I think part of it is a maturing of the system. A part of that, I think, I directly attribute it to the new patient count itself, or the new patient count in those more mature clinics. Yeah, where they've got, they've been established, and they've, you know, they've drawn the, the, the core of patients that are in that area. It's harder to get newer and newer patients to come into that, into that territory, or into that, into that clinic.

Peter D. Holt: So I think that's one of the reasons you're seeing kind of that drop in those clinics open more than 48 months compared to a clinic that's open less than that. I think that's probably the main thing I would look at right now. I don't know. Jake, your thoughts?

Jake Singleton: Yes, I would say as you think about 'twenty three we did a 4% comp for the full year and the mature stores did negative one.

Jake Singleton: Okay. Yeah. I would say, you know, as you think about 23, we did a 4% comp for the full year and the mature stores did a negative 1, so you had a 5% spread there. But because of rounding, it was a 6% spread here in Q1. But I think I would just point out, you know, because we're on a fiscal calendar, March just having the Sundays with Easter and us not rolling over, you know, what was a longstanding new patient contest and allocating those dollars to some marketing efforts in the April-May timeframe, I think had an impact on that March period in particular that drove down the comp for the quarter, but the spread was relatively close. Okay, that's helpful.

Jake Singleton: At a 5% spread there because of rounding it was a 6% spread here in Q1.

Jake Singleton: But I think I would just point to.

Jake Singleton: Because we're on a fiscal calendar.

Jake Singleton: March just having the Sundays with Easter and Thats not rolling over what was a long standing new patient contest and allocating those dollars to some marketing efforts in the April may timeframe, I think had an impact on that that March period in particular that drove down the comp for the quarter, but the spread was.

Jake Singleton: <unk> close.

Speaker Change: Okay. That's helpful. And then just lastly, a very big picture, obviously, we sort of Starbucks.

Anthony V. Vendetti: And then just last, a very big picture, obviously, we saw Starbucks come in very light in terms of sales. And, you know, they were saying that the occasional customer has not frequented Starbucks as often as they used to. Do you think the economy in general is having some negative impact on terms of, you know, getting new patients to come in the door? Or maybe just to the extent that you're able to measure that.

Anthony V. Vendetti: Come in very light in terms of.

Anthony V. Vendetti: Sales in.

Anthony V. Vendetti: They were saying the occasional customer.

Jake Singleton: Has not frequented.

Anthony V. Vendetti: <unk> as often as they used to.

Anthony V. Vendetti: Do you think the economy in general is having some negative.

Anthony V. Vendetti: Negative impact in terms of.

Anthony V. Vendetti: Getting getting new patients to come in the door.

Anthony V. Vendetti: Maybe just.

Anthony V. Vendetti: To the extent that you are able to measure that.

Anthony V. Vendetti: Is that is that something youre seeing because it sees its not just starbucks.

Peter D. Holt: Is that something you're seeing? Because it's not just Starbucks, you know, we're seeing that across other franchises as well this quarter. No, no, Anthony, I think it's a real issue, is that we know that, okay, if you go back to fourth quarter GDP growth, I think was, you know, what, 4.3% and this quarter is still like 2.3% of GDP. And so we're not in a recession, that's very clear, but you still have half the American people saying that, you know what, I am personally, that I'm paying more at the grocery store, I'm paying more to fill up the car with gas, I'm paying more to pay my interest rate on my credit card or my mortgage, rents are going up, and so I think that if you look at the demographics, the economic demographics of our patient base, that average income is somewhere between 50 and 105,000.

Peter D. Holt: We're seeing that across other franchise.

Peter D. Holt: As well this quarter.

Peter D. Holt: No Anthony I think that's the real issue is that we know that okay. If you go back to fourth quarter GDP growth I think was four 3% in this quarter is still like two 3% of GDP.

Peter D. Holt: And so we're not in a recession, that's very clear, but you still have half the American people, saying that you know what.

Peter D. Holt: Im personally that I'm paying more of the grocery store and pay more.

Peter D. Holt: Car with gas and pay more.

Peter D. Holt: The interest rate on my credit card on my mortgage rents are going up and so I think if you look at the demographics of the economic demographics of our patient base. The average income is somewhere between 50 and 105000 and so that group is in fact being hit by these increasing costs and feeling more uncertain about the economy and that they are.

Peter D. Holt: And so that group is, in fact, being hit by these increasing costs and feeling more uncertain about the economy and that they are, in fact, our patient base. And I've talked about this before on some of the other calls, that we do think one of the factors that we've seen in our lower patient count is the fact that they are feeling that with that economic uncertainty. There's still great value and importance of the service that we're offering, but I just That's very helpful. Sure, that makes sense. I'll hop back in the queue.

Peter D. Holt: In fact, with our patient base and I've talked about this before on some of the other calls.

Peter D. Holt: We do think one of the factors that we've seen in lower patient count. It is the fact that they are feeling that.

Peter D. Holt: Amid the uncertainty they're holding back so that there is growing over the counter medicine before they come in or not coming in at all but those that do come in they are converting at a higher rate those do come in are staying longer in November so I think that.

Peter D. Holt: There is still great value and importance of the service that we're offering them, but I just think in this kind of economic uncertainty that it does impact specifically the demographics of our patients.

Peter D. Holt: Are the economics Thats very helpful.

Speaker Change: Sure that makes sense I'll hop back into queue. Thank you I appreciate it.

Peter D. Holt: Your next question comes from P. J <unk> with Craig Hallum Great.

Anthony V. Vendetti: Thank you. Appreciate it. Your next question comes from CJ DiPellina with the Craig Hallam Group. Hey, everyone. I'm on behalf of Jeremy Hamblin.

CJ DiPellina: Hey, everyone.

CJ DiPellina: I had a couple questions for you, and I wanted to start with the refranchising effort. Seems like you're still, you know, fairly early in the process. But just curious if you have a timeline on when we can, you know, start to see those transactions go through, and anything you can share on kind of expected deal economics would be really helpful. Sure. And we'll both answer this.

CJ DiPellina: For Jeremy Hamblin had.

CJ DiPellina: I had a couple of questions for you I wanted to start with the Refranchising effort. It seems like Youre still fairly early on the process, but just curious if you have a timeline on when we can.

CJ DiPellina: Start to see those transactions go through and anything you can share on kind of expected deal economics would be would be really helpful.

Speaker Change: Sure and then we'll both answer this I would say is that we are well into the process and as I said on the call that we are we've got a lot of interest from our franchisees. We've also opened this up to franchisees outside the joint World and so we've been looking at hiring an investment banker who specializes in refranchising effort.

Peter D. Holt: What I would say is that we're well into the process, and as I said on the call, we've got a lot of interest from our franchisees. We've also opened this up to franchisees outside the joint world, and so we've been looking at hiring an investment banker who specializes in re-franchising efforts. And I've talked about this before. This is not a fire sale. We're not just trying to get these off our books. These are valuable assets that we want to put them in the hands of the franchisees who can most effectively run them. I don't need to trade problems with you.

Peter D. Holt: Because when I've talked about this before this is not a fire sale. We're not just trying to get these off our books. These are valuable assets that we want to put them in the hands of the franchisees, who can most effectively run them I don't need to trade problems and so we are going through a very structured process to make sure that within the hands of the right franchisees.

Peter D. Holt: And so we are, in fact, going through a very structured process to make sure that we're putting them in the hands of the right franchisees. But we're also looking at some of the interest that's been out, especially as we've opened this outside of the group of the joint franchisees, some very sophisticated groups who are interested in larger territories for our clinics. We've got 135 corporate clinics, and we've talked about the vast majority being up for sale.

Peter D. Holt: But we're also looking at some of the some of the interest its been out, especially as we've opened this outside of the joint.

Peter D. Holt: <unk> franchisees has come some very sophisticated groups, who are interested in larger territory of our clinics. We've got 135 corporate clinics, we've talked about the vast majority of being up for sale.

Peter D. Holt: So I think that we have some real opportunities to look at those transactions. And so those transactions, of course, are a little more, you know; they'll take a little more due diligence, take a little more time to put together.

Peter D. Holt: So I think that we have some real opportunities.

Peter D. Holt: To look at those transactions and so those transactions of course, there are little more take a little more due diligence to take a little more time to put together, but what I would say is that we're certainly pleased with the interest in this refranchising effort and that from our perspective, having said always you said wed like to get this done as quickly as possible because it does.

Peter D. Holt: But what I would say is that we're certainly pleased with the interest in this refranchising effort and that, from our perspective, having said all I just said, we'd like to get this done as quickly as possible because it does take a toll on continuing to run these units when they know that they're, you know, if you're an employee or outside the four walls employee for those units, it creates uncertainty, and people don' And so, you know, we would expect that the majority of those employees would be hired by the new owners.

Peter D. Holt: Take a toll on continuing to run these units when they know that the bureau of employee or the outside of the four wall employ for those units.

Peter D. Holt: It creates uncertainty and people don't like uncertainty and so we would expect that the majority of those employees would be hired by the new owners, but it creates that uncertainty that you just won a minimized as we go through this effort.

Peter D. Holt: But it creates that uncertainty that you just want to minimize, you know, as we go through this. I don't know, Jake, if you have anything more to add. I think there was a part of the question there on valuation, and, you know, we are in active negotiations. So, you know, probably don't want to give too much out there.

Jake Singleton: I don't know Jack if you have anything more to add.

Jake Singleton: And I think there was a part of the question there on on valuation.

Peter D. Holt: Are in active negotiations so.

Peter D. Holt: Probably don't want to give too much out there but.

Jake Singleton: But, you know, we've done a historical look-back analysis; we were purchasers of clinics for a lot of years. And we also see all the franchisee to franchisee transfers that happen within our system because we do hold that right of first refusal. So we have a pretty good sense for the historical multiples of EBITDA that these trade for, and we'll continue to partner with the right groups that can maximize that value and generate the proceeds that these quality assets deserve. Okay, I understand.

Jake Singleton: We've done a historical look back analysis, we were purchasers of clinics for a lot of years and.

Jake Singleton: And we also see all the franchisee to franchisee transfers that happen within our system because we do hold that writer first refusal. So we have a pretty good sense for historical multiples of EBITDA that these trade for.

Jake Singleton: And we will continue to partner with the right groups that can maximize that value and generate the proceeds that these quality assets deserve.

Speaker Change: Okay understood. Thank you.

CJ DiPellina: And then moving on to the P&L, it looks like general administrative was up year over year on an absolute basis. Just curious how you guys are thinking about G&A moving forward, and if we should expect some more absolute increases year over year. Yeah, I think, you know, Q1 last year was 20.3 million or 20 million. I think it was 20.3 million for this quarter.

CJ DiPellina: And then moving on to the P&L looks like.

CJ DiPellina: General and administrative.

CJ DiPellina: It's up year over year on an absolute basis, just curious how you guys are thinking about G&A moving forward and if we should expect some more.

CJ DiPellina: More absolute increases year over year.

Jake Singleton: So slightly higher, you know, we did have some accounting and legal, and professional service costs associated with some of the refranchising effort. You know, we do have a year's worth of additional headcount that's rolling over, you know, on a, you know, 100 plus unit increased base. You know, I think the critical piece of that question is that we understand that for the refranchising strategy to work, we have to be critically focused on cutting the necessary GNA to reach those profitability targets that we have.

Jake Singleton: We did have some accounting and legal and professional service costs associated with some of the Refranchising effort.

Jake Singleton: We do have a year's worth of additional head count that's that's rolling over.

Jake Singleton: 100, plus unit increased base.

Jake Singleton: I think it's a critical piece of that question is we understand it for the Refranchising strategy to work we have to be critically focused on on cutting the necessary G&A to reach those profitability targets that we have.

Jake Singleton: So that'll be something that we consistently monitor, you know, as you gleaned from the call, we have not executed a ton of those deals yet. And you'll expect to see GNA begin to taper, you know, as we continue our progress through that refranchising effort. So it'll really be dependent on, you know, when the refranchising transactions occur, how large they are, and then we'll be able to shed the associated GNA, but that will be a critical focus of management as we continue this process. Okay, cool. Thank you. And then I will have one more.

Jake Singleton: So that'll be something that we consistently monitor as you gleaned from the call. We have not executed through March 31, a ton of those deals yet and you will expect to see that G&A begin to taper as we.

Jake Singleton: We continue our progress through that Refranchising effort. So it will really be dependent on when the refranchising transactions how large they are.

Jake Singleton: And then we will be able to shed the associated G&A, but that will be a critical focus of management as we continue this process.

Speaker Change: Okay cool. Thank you and then one more.

CJ DiPellina: So the FAST Act came into place about a month ago. I'm curious, you know, especially with the California stores, if you've seen any attritional labor of, you know, maybe some of the lower-paying jobs going, you know, and finding workouts where, Yeah, I think, from our perspective, you know, that had been, you know, rumored for a long time. So I think we have started to see the wage pressures on that, you know, certainly before the bill was officially executed.

CJ DiPellina: So the fast act came into place about a month ago, I'm curious, especially with the California stores curious if.

CJ DiPellina: You have seen any attrition of labor of maybe some of the lower paying jobs going.

CJ DiPellina: On funding funding work elsewhere.

CJ DiPellina: <unk>.

CJ DiPellina: That had been rumored for a long time, so I think we start to see we started to see the wage pressures on that certainly before the bill was officially executed.

Jake Singleton: We haven't really seen an uptick in turnover as it relates to our roles, and knowing that they now have kind of a competitive benchmark out there for some other QSR-type concepts. Something that we'll continue to monitor, but we haven't really felt a direct and immediate impact so far as it relates to our wage levels because I think we have largely absorbed a lot of that pressure kind of leading up to the actual finalization. And certainly, it's impacting the market, but specifically the QSR. Right? Okay. Thank you. I'll hop back in the queue.

Speaker Change: And in terms of its impact in the market but.

Speaker Change: Now specifically to <unk>.

Jake Singleton: Yes.

Speaker Change: Alright, Okay. Thank you I'll hop back in the queue.

Kaylee: That does conclude our question and answer session. I would like to turn the conference back over to Peter for any closing remarks. Thank you, Kelly, and thank you all for attending the call. Today, I'd like to share a note from our VP of Chiropractic and Compliance that he received from a prior student who went through a preceptorship program at the Joint and is now a full-time employee. And I'm saying, My preceptorship with the Joint Chiropractic was an enriching experience that provided me with invaluable hands-on practice and deepened my understanding of patient care. The mentorship I received was top-notch, with so many different doctors providing helpful input in my technique and flow.

Jake Singleton: It does conclude our question and answer session I would like to turn the conference back over to Peter for any closing remarks.

Peter: Thank you Carrie and thank you all for attending the call today I'd like to share a note from our VP of car Practic in compliance he would receive from a prior student who went through a preceptorship program at the joined and is now full time employee.

Peter D. Holt: The opportunity to work with a diverse patient population allowed me to hone my adjusting skills and tailor my treatment plans to individual needs. This preceptorship bolstered my confidence in my chiropractic abilities and reinforced my commitment to this healing profession. And we're so pleased to have had that doctor join our team. Thank you.

Peter D. Holt: Im quoting my Preceptorship with the joint Chiropractic was an enriched experience that provided me the invaluable hands on practice and deepened my understanding and patient care. The Mentorship I received was top notch with so many different doctors, providing helpful input and my technique and flow the opportunity to work with a diverse patient population allowed me to hanmi adjusting skills and tailor my true.

Peter D. Holt: <unk> plans to individual needs. This preceptorship bolstered my confidence in my car practic abilities, and reinforcing our commitment to this healing profession and we're so pleased to have had that Dr. <unk> joined our team.

Speaker Change: Thank you stay well adjusted.

Speaker Change: That does conclude our conference for today. Thank you for participating you may now disconnect.

unknown: That does conclude our conference for today. Thank you for participating. You may now disconnect. [inaudible] https://www.youtube.com , , , , [inaudible] Director of Photography, Richard Magnusen Music by David Barnard Photography by David Barnard Edited by David Barnard Music by David Barnard Music by David Barnard Music by David Barnard, [inaudible] © The Ultimate Parody Site!

unknown: [music].

Lysen Onlimode: © BF-WATCH TV 2021, © The Ultimate Parody Site! [inaudible] https://www.youtube.com [inaudible] , , , , , , , , , , , , , , , , , , , , , [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good day and welcome to the joint group. First Quarter 2024 Financial Results Conference Call.

Lysen Onlimode: Yeah.

Lysen Onlimode: [music].

Lysen Onlimode: Yes.

Lysen Onlimode: [music].

Lysen Onlimode: Yeah.

Lysen Onlimode: [music].

Lysen Onlimode: Yeah.

Lysen Onlimode: [music].

Lysen Onlimode: Sure.

Lysen Onlimode: [music].

Lysen Onlimode: Okay.

Lysen Onlimode: [music].

Lysen Onlimode: Yes.

Lysen Onlimode: Okay.

Lysen Onlimode: [music].

Lysen Onlimode: Yes.

Lysen Onlimode: [music].

Lysen Onlimode: Okay.

Lysen Onlimode:

Lysen Onlimode: Yes.

Lysen Onlimode: [music].

Lysen Onlimode: Okay.

Lysen Onlimode: Yes.

Lysen Onlimode: Sure.

Lysen Onlimode: Okay.

Lysen Onlimode: [music].

Lysen Onlimode: Okay.

Lysen Onlimode: Yes.

Lysen Onlimode: [music].

Lysen Onlimode: Okay.

Lysen Onlimode: [music].

Lysen Onlimode: Yes.

Lysen Onlimode: [music].

Lysen Onlimode: Okay.

Lysen Onlimode: [music].

Lysen Onlimode: Sure.

Lysen Onlimode: Yes.

Lysen Onlimode: [music].

Lysen Onlimode: Okay.

Lysen Onlimode: [music].

Lysen Onlimode: Okay.

Lysen Onlimode: Yes.

Lysen Onlimode: Okay.

Lysen Onlimode: [music].

Lysen Onlimode: Okay.

Lysen Onlimode: [music].

Lysen Onlimode: Okay.

Lysen Onlimode: Sure.

Lysen Onlimode: Yes.

Lysen Onlimode: Okay.

Lysen Onlimode: <unk>.

Lysen Onlimode: Yes.

Lysen Onlimode: [music].

Lysen Onlimode: Okay.

Lysen Onlimode: Yes.

Lysen Onlimode: Okay.

Lysen Onlimode: Sure.

Lysen Onlimode: Okay.

Lysen Onlimode: [music].

Lysen Onlimode: Okay.

Lysen Onlimode: [music].

Lysen Onlimode: Okay.

Lysen Onlimode: Good day and welcome to the joint Great.

Lysen Onlimode: First quarter 'twenty 'twenty four financial results conference call.

Lysen Onlimode: All participants, I am Lyssa Nunley-Node. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. You may press star then 1 on a touch-tone phone.

Lysen Onlimode: All participants are in listen only mode should you need assistance. Please signal.

Lysen Onlimode: Okay.

Lysen Onlimode: Alright.

Lysen Onlimode: After today's presentation there'll be an opportunity to ask questions.

Lysen Onlimode: You May press Star then one on a touchtone packs.

David Barnard: To withdraw your questions, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to David Barnard with LHS Investor Relations. Please go ahead.

Speaker Change: <unk> your question please.

David Barnard: I would now like to turn the conference over to David benign right.

Jeff: Hey, Jeff.

David Barnard: Please go ahead.

David Barnard: Thank you Jamie Good afternoon, everyone. This is David Barnard of La <unk> Investor Relations.

David Barnard: Joining us on the call today are president and CEO, Peter halt and CFO Jake Singleton.

David Barnard: Please note we're using a slide presentation that can be found at https, IR dot to joint Dot com under events.

David Barnard: Today after the close of market. The joint Corp issued its results for the quarter ended March 31 2024.

David Barnard: <unk> already have a copy of the press release it can be found in the Investor Relations section of the company's website.

David Barnard: As provided on slide two please be advised that today's discussion includes forward looking statements within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of $19 95.

David Barnard: For a discussion of the risks and uncertainties that could cause actual results to differ from those expressed or implied in the forward-looking statements, please review the risk factors detailed in the company's reports on Forms 10-K and 10-Q, as well as other reports that the company files from time to time with the SEC. Finally, any forward-looking statements included in this earnings call are made only as of the date of this call, and we do not undertake any obligation to revise our results or publicly release any updates to these forward-looking statements in light of new information or future updates. Management uses EBITDA and adjusted EBITDA, which are non-GAAP financial measures.

David Barnard: These are presented because they are important measures used by management to assess financial performance. Management believes they provide a more transparent view of the company's underlying operating performance and operating trends than GAAP measures alone. Reconciliation of net income to EBITDA and adjusted EBITDA is presented in the press. The company defines EBITDA as net income or loss before net interest, tax expense, depreciation, and amortization.

David Barnard: All statements other than statements of historical facts may be considered forward looking statements. Although the company believes that the expectations and assumptions reflected in these forward looking statements are reasonable it can make no assurances that such expectations or assumptions will prove to have been correct. Actual results may differ materially from those expressed.

David Barnard: Rest or implied in forward looking statements due to various risks and uncertainties. As a result, we caution you against placing undue reliance on these forward looking statements for a discussion of the risks and uncertainties that could cause actual results to differ from those expressed or implied in the forward looking statements. Please review the risk factors detailed in the Companys reports on forms 10.

David Barnard: Finally, any forward looking statements included in this earnings call are made only as of the date of this call and we do not take any obligation to revise our results or publicly release any updates to these forward looking statements in light of new information or future events.

David Barnard: 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 reconciliation of net income to EBITDA.

David Barnard: 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.

David Barnard: Any calculation record royalty fees and are indicative of the financial health of the franchisees base systemwide comp sales include the revenues from both company owned or managed clinics and franchise clinics and in each case have been opened at least 13 four months and exclude any clinics that have closed turning to slide three its my pleasure to.

David Barnard: Because these sales are the basis on which a company calculates and records royalty fees and are indicative of the financial health of the franchisee's base, system-wide comp sales include the revenues from both company-owned or managed clinics and franchise clinics that, in each case, have been open at least 13 full months and exclude any clinics that have closed. Turning to slide three, it's my pleasure to turn the call over to Peter Holt.

Peter D. Holt: Thank you, David, and I welcome everybody to the call. The Joint is revolutionizing access to chiropractic care by providing affordable concierge-style membership-based services in convenient retail settings. We began 2024 with a vision to be the champions of chiropractic, and we focused on increasing new patient counts, improving existing patient engagement, and positioning to re-franchise the vast majority of our corporate portfolio, and we're making solid progress. Additionally, during the first quarter, we grew revenue, improved the bottom line, and tripled our franchise sales sequentially. Turn to slide four.

Peter D. Holt: Thank you, David and I welcome everybody to the call. The joint is revolutionizing access to chiropractic care by providing affordable concierge style membership based services and convenient retail settings. We've.

Peter D. Holt: I'll review the first quarter of 2024 compared to the same period in 2023. System-wide sales grew to $126.3 million, increasing 9%. System-wide comp sales for clinics that have been open for at least a full 13 months increased 3%, and revenue increased 5%. Adjusted EBITDA was $3.5 million for Q1 2024, up 74% over the same period last year. On March 31, 2024, our unrestricted cash was $18.7 million, compared to $18.2 million at December 31, 2023.

Speaker Change: And we're making solid progress.

Peter D. Holt: Turning to slide four.

Peter D. Holt: I'll review, the first quarter of 2024 compared to the same period of 2023.

Peter D. Holt: System wide comp sales for clinics that have been opened for at least a full 13 months increased 3% rare.

Peter D. Holt: Revenue increased 5%.

Peter D. Holt: On March 31, 2024, our unrestricted cash was $18 7 million.

Peter D. Holt: Compared to $18 2 million at December 31, 2023.

Speaker Change: Turning to slide five I'll discuss our clinic metrics.

Peter D. Holt: We opened 23 franchise clinics and closed four in the first quarter of 2024 compared to 29 franchise clinics opened and one closed in the first quarter of 2023.

Peter D. Holt: At March 31, 2024, our total clinic count reached 954 units consisting of 819 franchised and 135 corporate up from 935 opened clinics 800 of which were franchise at the end of the year of 2023.

Peter D. Holt: The clinic portfolio mix remains 86% franchised and 14% company owned or managed, and although it's expected to shift during the year as we execute our refranchising strategy. Turning to slide six, we're focused on refranchising as our primary initiative in 2024. As discussed, we received over 100 requests for information and have been vetting the opportunities to identify the most effective franchisees.

Peter D. Holt: The clinic portfolio mix remains 86% franchised and 14% company owned or managed and although it is expected to shift during the year as we execute our refranchising strategy.

Peter D. Holt: Turning to slide six we're focused on Refranchising strategy as our primary initiative in 2024.

Peter D. Holt: As discussed we received over 100 requests for information that had been betting opportunities to identify the most effective franchisees.

Peter D. Holt: And with regards to the sales of our corporate clinics.

Peter D. Holt: There has been a strong interest in larger transactions as these more as these are more complex. We've identified an investment bank specializing in refranchising to help us.

Peter D. Holt: Working together, we expect to ensure we re-franchise to the best of our franchisees, accelerate the process, and create value for all of our stakeholders. We are well on our way to generating capital to be reinvested in the brand, marketing, RD territory acquisitions, and or stock repurchases among other options. Turning to slide seven, I'll review our franchise license bill. During Q1, we sold 15 franchise licenses compared to 17 in Q1 2023. Of the licenses sold, 87% of the franchisees were new to the joint.

Peter D. Holt: We're well on our way to generating capital to be reinvested in brand marketing Rd territory acquisition, and our stock repurchases among other options.

Peter D. Holt: Turning to slide seven I'll review, our franchise license sales.

Peter D. Holt: The licenses sold 87% of the franchisees were new to the joined.

Peter D. Holt: This reflects investment and validation of our franchise concept.

Peter D. Holt: Q1, 2024 tripled sales compared to Q4 of 2023, a solid increase giving us ongoing given the ongoing high interest rates inflation and strong employment.

Peter D. Holt: I do want to note that franchise sales maybe also be in part impacted by our Refranchising strategy.

Peter D. Holt: On March 31, 2024, we had 166 light franchise licenses and active development as well as 17 regional developers with an aggregate 10 minimum 10 year minimum development schedule for 674 clinics.

Peter D. Holt: We do not plan to establish any new additional original territories, and we will consider opportunities to require territories as the Rd territories mature.

Peter D. Holt: Turning to slide 8, I'll review our marketing efforts. In Q1, we conducted our annual patient survey, which provided great insights into our brand perception. We're proud of the results of the survey and remain committed to doing even better. First, the Joint continues to demonstrate our ability to grow the market with 36% of our patients being new to chiropractic in 2023. Next, patients gave the joint a strong net promoter score of 64%, and an amazing 92% of patients with prior chiropractic experience rated the joint as better or as equal to the previous care they'd received.

Peter D. Holt: In Q1, we conducted our annual patient survey, which provided great insight into our brand perception.

Peter D. Holt: We're proud of the results of the survey and we remain committed to doing even better.

Peter D. Holt: First the joint continues to demonstrate our ability to grow the market with 36% of our patients being new to car Practic in 2023.

Peter D. Holt: Patients gave the joined to strong net promoter score of 64%.

Peter D. Holt: And an amazing 92% of patients with prior car Practic experience really the joint is better or is equal to the previous care then received.

Peter D. Holt: Additionally, research led us to redirect some of our marketing resources from older campaigns, New social media Influencer efforts.

Peter D. Holt: With strong positive reception from consumers, new and not new to car practic as well as our existing patients. Our data indicates that the biggest opportunity is to drive awareness of car Practic care in general and consideration of the joint in particular.

Peter D. Holt: In light of this data we've made a strategic decision to forgo our in clinic, new patient contest. This past March to invest in driving consideration in April.

Peter D. Holt: We're doing that through evolving are to grow markets approach at all levels of the marketing funnel.

Peter D. Holt: At the top of the funnel, we've introduced social media Influencers last month.

Peter D. Holt: Our lineup features both health and wellness as well as athlete influencers, including Sherry Hawkins U S track and field Olympian.

Peter D. Holt: We're partnering with these influences to drop to reach their broad audiences as well as the showcase the benefits of chiropractic care in a relevant way.

Peter D. Holt: In addition, several co ops will feature regional Influencers Influencers to support the National campaign driving consideration in their local market by leveraging relevant personality.

Peter D. Holt: We're also testing a variety of new promotions, channels, and tactics in our co-ops to better optimize our promotions and media mix based on the market and the patient base. In Q1, we will continue testing digital initiatives with our patient experience roadmap. We're seeing success in driving new patients in our initial visit bookings test by providing the opportunity for new patients to book an appointment to complete their initial exam and visit. Patients who participated indicated that the booking was a positive experience and important to their choosing a joint.

Peter D. Holt: In Q1, we continued testing digital initiatives with our patient experience roadmap.

Peter D. Holt: We're seeing success in driving new patients in our initial visit bookings test by providing the opportunity for new patients to book an appointment to complete their initial examine visit.

Peter D. Holt: Patients who have participated indicated that the booking was a positive experience and important to their choosing the joint.

Peter D. Holt: We've also made progress in replacing our patient paper intake forms with an enhanced digital intake process and are now in the next phase of rollout before the next phase of testing before a rollout.

Jake Singleton: Finally, the team is hard at work in creating stronger local store marketing tools working with a development team and leveraging the wealth of data that we have about our patients. We're implementing a clinic segmentation strategy to provide more effective local store marketing program.

Peter D. Holt: And with that Jake I'll turn it over to you.

Jake Singleton: Thanks, Peter and let's turn to slide nine.

Jake Singleton: I'll review our clinic comps for Q1 2024 compared to Q1 2023. System-wide sales for all clinics open for any amount of time increased to $126.3 million, up 9%; system-wide comp sales for all clinics open 13 months increased 3%. System-wide comp sales for mature clinics opened 48 months or more decreased 3%.

Jake Singleton: Ill review, our clinic comps for Q1 2024 compared to Q1 2023.

Jake Singleton: System wide sales for all clinics opened for any amount of time increased to $126 3 million up 9%.

Jake Singleton: System wide comp sales for all clinics opened 13 months increased 3%.

Jake Singleton: System wide comp sales for mature clinics opened 48 months or more decreased 3%.

Jake Singleton: Revenue was $29 7 million up $1 4 million or 5%.

Jake Singleton: The increases represent continued year over year growth in both the franchise base in the corporate portfolio.

Jake Singleton: Cost of revenues was $2 $7 million up 10% over the same period last year, reflecting the associated higher regional developer royalties and commissions.

Jake Singleton: Selling and marketing expenses were $3 9 million down.

Jake Singleton: <unk> expenses were $20 3 million up only 1% compared to the same period last year, reflecting the lower rent for corporate clinics held for sale as well as the continued cost control initiatives offsetting the majority of increased expense to support more clinics.

Jake Singleton: Compared to operating loss of $653000 in Q1 2023.

Jake Singleton: Other income was $35000 compared to $3 8 million in Q1, 'twenty, three which reflected the receipt of employee retention credits in the year ago period.

Jake Singleton: Income tax expense was $179000 compared to $841000 in Q1 'twenty three.

Jake Singleton: Adjusted EBITDA was $3 5 million up 74% from $2 million in Q1 2023.

Jake Singleton: Franchise clinic adjusted EBITDA was 15 was up 15% at $5 6 million company owned or managed clinic adjusted EBITDA, reflecting the aforementioned accounting for rent expense related to the clinics held for sale increased 94% to $3 1 million.

Jake Singleton: Corporate expense is a component of adjusted EBITDA was $5 $1 million $738000 higher than Q1, 'twenty three related to higher legal and accounting and greater professional services related to our refranchising efforts and it maintenance.

Jake Singleton: Corporate expense is a component of adjusted EBITDA with $5.1 million, $738,000 higher than Q1 2023, related to higher legal and accounting expenses and greater professional services related to our re-franchising efforts and IT maintenance. On to a review of our balance sheet and cash flow, at March 31st, 2024, our unrestricted cash was $18.7 million compared to $18.2 million at December 31st, 2023; cash flow from operations was partially offset by the $2 million repayment of the line of credit to JPMorgan Chase.

Jake Singleton: Onto a review of our balance sheet and cash flow at March 31, 2024, our unrestricted cash was $18 $7 million.

Jake Singleton: Compared to $18 2 million at December 31, 2023.

Jake Singleton: Cash flow from operations was partially offset by the $2 million repayment of the line of credit to JP Morgan Chase.

Jake Singleton: Through this facility, we retained immediate access to $20 million through February 2027. Moving on to slide 10, we are reiterating all elements of our guidance. System-wide sales are expected to be between $530 and $545 million, compared to $488 million in 2023. System-wide comp sales for all clinics open 13 months or more are expected to increase in the mid-single digits compared to an increase of 4% in 2023. New franchise clinic openings, excluding the impact of refranchised clinics, are expected to be between 60 and 75, compared to 104 in 2023, with the difference reflecting the impact of our refranchising efforts. And with that, I'll turn the call back over to you, Peter. Thanks, Jake.

Jake Singleton: Through this facility, we retain immediate access to $20 million through February 2027.

Peter: Onto slide 10, we are reiterating.

Peter: <unk> all elements of our guidance.

Jake Singleton: System wide sales are expected to be between 530 and $545 million.

Peter: Compared to $488 million in 2023.

Jake Singleton: New franchise clinic openings, excluding the impact of re franchise clinics are expected to be between 60, and 75% compared to 104 in 2023, the difference reflecting the impact of our refranchising efforts and with that I will turn the call back over to you Peter.

Peter: Thanks, Jake turning to slide 11 at this point the joint we're committed to continually improving our brand our people and our performance to truly be the champion of chiropractic care.

Peter D. Holt: Our goal is to build brand equity and generate incremental revenue streams for all of our people. Regarding our people, one of the ways in which we support our existing team of doctors of chiropractic is by providing continuing education. We also empower the next generation of D.C.s in a variety of ways. As a part of our ongoing effort to educate the chiropractic community about the advantages of the joint offers patients, we've increased our interactions with chiropractic universities. In addition to participating in job fairs, we support the schools with scholarships and donations to key chiropractic colleges such as Life, Palmer, Parker, Sherman, Texas Chiropractic College, and Life West.

Peter D. Holt: Regarding people one of the ways in which we support our existing team of doctors at car Practic is by providing continuing education. We also empower the next generation of <unk> in a variety of ways.

Peter D. Holt: As a part of our ongoing effort to educate the car Practic community about the advantages of the joint offers patients we've increased our interactions with the car Practic universities.

Peter D. Holt: In addition to participating in job fairs, we support the schools with scholarships and donations to key car Practic colleges, such as life Palmer Parker Sherman, Texas, Chiropractic College and life West <unk>.

Peter D. Holt: Additionally, last month, we announced our first endowment that joined car Patrick in doubt scholarship for Logan University.

Peter D. Holt: This is another way to support the profession and the greater community enhance our relationships with the schools invest in the future of graduating doctors a car practic and fuel the growth of our future pool of Dcs.

Peter D. Holt: The quarter of a $1 million down scholarship will provide much needed tuition assistance for generations of students or $10000 annually to a student who demonstrates academic achievement and a passion for car practic and quality patient care.

Peter D. Holt: We also have our preceptorship program. We found that most chiropractic students and new graduates want to learn more about owning and operating a practice. We developed a learning path that combines real patient and business experience while students are building their clinical skills. This program has two components, patient care completed under the supervision of joint preceptors in the clinics and 18 online training modules covering advanced clinical business and self-development topics such as goal setting, business planning, and creating enhanced patient experiences. These classes are presented by joint subject matter experts, as well as clinical experts in the chiropractic field.

Peter D. Holt: We also have our Preceptorship program, we found that most car practic students in new graduates want to learn more about owning and operating the practice we.

Peter D. Holt: We developed a learning path, which combines real patient and business experience to our students are building their clinical skills.

Peter D. Holt: Program has two components patient care completed under the supervision of joins Preceptors in the clinics in 18 online training modules covering advanced clinical business self development topics, such as goal setting business planning and creating enhanced patient experiences.

Peter D. Holt: These classes are presented by joint subject matter experts as well as clinical experts in the car Practic field.

Peter D. Holt: In summary in 2024, we stay focused on the Refranchising of our corporate portfolio fostering a strong franchise base and improving clinic economics and increasing productivity.

Peter D. Holt: Before I begin questions I would like to invite you to meet with US at the B Riley 24th annual institutional Investor Conference. Later, this month and the Oppenheimer, 24th annual consumer growth and E Commerce Conference in June.

Kayleigh: And with that Kelly I'm ready to begin the Q&A.

Kaylee: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone.

Kayleigh: Thank you we will now begin the question and answer session.

Kaylee: Ask a question you May press Star then one on your Touchtone fat.

George Arthur Kelly: If you are using a speakerphone, please pick up the handset to ask your question. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. Hey everyone, thanks for taking my question. Hey George.

Kaylee: Using a speakerphone please pick up the handset to.

Speaker Change: To ask a question.

Speaker Change: If at any time your question with Jeff and you would like to withdraw your question. Please press star one.

George Arthur Kelly: Your first question comes from George Kelly with Ross.

Speaker Change: Okay, everyone. Thanks for taking my question.

Peter D. Holt: Hey Peter, maybe we could start on comp gross. A couple questions on that topic. I was curious what you've seen so far in Q2, and then secondly, what gives you confidence that you can achieve a mid-single-digit percent comp growth rate that you mentioned as your target for this fiscal year? Sure.

Speaker Change: Hey, George.

Speaker Change: Hey, Peter So maybe if we could start on comp growth.

Peter D. Holt: I think that to answer the first part of that question is... No, the first part of that question was, "What are we seeing in Q2?". What are we seeing in Q2? And I would say that, typically, we're not commenting too much on future clinics, but you know, we obviously had a 3% increase in Q1. We have been talking about how we're cautiously optimistic as we reflect on 2024 performance. And I would say that, as we think, as we look forward, that's certainly what we're expecting. And the second part of that question is, why would you expect that?

Peter D. Holt: A couple of questions on that topic I was curious what you've seen.

Peter D. Holt: So far in Q2.

Peter D. Holt: And then secondly, what gives you confidence that you can achieve a mid single digit percent.

Peter D. Holt: Comp growth rate in <unk>.

Peter D. Holt: That you mentioned is your target for this fiscal year.

Peter D. Holt: Sure.

Peter D. Holt: I think that to answer the first part of that question is.

Peter D. Holt: The first part of that question was what are we seen in Q2 than we've seen in Q2 and I would say that typically we're not commenting too much on future clinics, but we obviously had a 3% in Q1.

Peter D. Holt: We have been talking about that we're cautiously optimistic as we reflect on 2020 for performance and I would say that we're seeing a continued improvement in that number as we think as we look forward. That's certainly what we're expecting.

Peter D. Holt: The second part of that question is why would you expect that and I think that's really because we're continually focusing on the biggest challenge I think we face in the last couple of years as our new patient count.

Peter D. Holt: And I think that's really because we're continually focusing on the biggest challenge I think we've faced in the last couple of years is that drop in new patient counts. And I think we've got some great programs taking place that will really help us address that issue to bring those new patients in. And when we look at those three metrics that govern our concepts, you know, the new patient count, the conversion, and the attrition, we're continually seeing positive results on our conversion and our attrition; our patients are staying with us longer.

Peter D. Holt: Drop and I think we've got some great program, taking place that will really help us address that issue to bring those new patients. In then we will look at those three metrics that govern our concept the new patient count the conversion and nutrition, we're continually seeing positive results on our conversion.

Peter D. Holt: And our attrition or patients are staying with us longer.

Peter D. Holt: If you look at our new patient count for Q1, it was down 3% compared to the same period last period, but I think that was also related to just the challenges of March March had five Sundays in it.

Peter D. Holt: One of those Sundays was Easter, and we also stopped our new patient program, our promotion that we ran last year that we did not run this year. So I think that hit that number a little bit for that last month. But I think looking at what we have, these programs that we're putting in place, our influencers, I think I feel very good that we will be able to see an improvement in that new patient count, which is so important for us and for our cause. Okay, that's helpful.

Peter D. Holt: One of those Sundays was Easter we also stopped our new patient program. Our promotion that we ran last year that we did not run this year. So I think that hit that number a little bit for that last month, but I think looking at what we have these programs that we're putting in place are influencers.

Peter D. Holt: I feel very good.

Peter D. Holt: That will be able to see an improvement in that new patient count, which is so important for us for our comps.

Peter D. Holt: And then, Peter, you mentioned in your prepared remark that you are sort of assessing different products or services that might potentially work with the model. And in the past, you've talked about perhaps taking a little pricing on some of your oldest legacy members that are in much lower price points. I'm curious if either of those initiatives are contemplated in that mid-single-digit comp guidance. And if they're not, even still, are there things you might put in place later this year?

Speaker Change: Okay. That's helpful. And then Peter you mentioned in your prepared remarks.

Peter D. Holt: You are sort of assessing different products or services that might potentially work with the model and in the past you've talked about.

Peter D. Holt: Perhaps taking a little pricing on some of your oldest legacy.

Peter D. Holt: Members that are in a much lower price points I am curious if either of those initiatives are contemplated in that mid single digit comp guidance and are there things that if theyre not even still are they things you might.

Peter D. Holt: You might put in place later this year.

Speaker Change: The answer is yes that we could get some of them put in place this year, probably towards the end of the year because if we're talking about any kind of <unk> changing our grandfather and policy or any price increases.

Peter D. Holt: There's going to be some testing involved with that before we were to implement a program like that but that is possible and the same with the idea of any kind of an ancillary products or services that we would add to the to the clinics and we certainly are looking for ways to do that we want to be very thoughtful about that we want to make sure that what we're adding is accretive.

Peter D. Holt: Accretive to the bottom line and not creating complexity in the business model.

Peter D. Holt: It is not necessary. So we're still in those early stages of identifying the different programs that we can put in place to increase those sales through those additional products and services so more to come on that as well.

Peter D. Holt: So more to come on that, as we've already, we've designed our kind of a committee that's looking through that to help us make those good decisions. And the final part of that answer is, no; our guidance on the comps did not include or take into account any change in the pricing structure or additional products or services that would be sold in the clinic in 2024. Okay, I appreciate it. I'll hop back in the queue.

Peter D. Holt: We are as we've designed our kind of a committee thats looking through that.

Peter D. Holt: To help us make those those good decisions and the final part of that answer is no.

Peter D. Holt: Our guidance on the on the comps did not and did not include are taken into account any change in the pricing structure, our additional products or services that would be sold in the clinic in 2024.

Peter D. Holt: Okay.

Speaker Change: Appreciate it I'll hop back in the queue.

Speaker Change: Thank you.

Anthony V. Vendetti: Thank you. Your question comes from Anthony Vendetti with Max. Thank you. So just a couple quick questions here. So the clinics, you say in-store sales at 13 months are up around 3%, but the ones open about four years are down. What do you think that's attributed to? Is that sort of a leveling off? And then maybe just a little bit on the reasoning in general for the closures. I mean, this quarter you had four.

Peter D. Holt: Joe.

Peter D. Holt: From Anthony Vendetti with Maxim Group.

Speaker Change: Thank you.

Peter D. Holt: I guess the quarter last year was one. You know, do you wait to see how, you know, if the ones that are down, are you looking at revenue trends and profitability or just profitability? How do you look at those in terms of closure? And then I'll have a couple of follow-ups. Okay, to specifically, you know, speak to the closures, that, yes, we have foreclosures this year, and that, again, for a system of our size, nearly 1,000 units, you know, foreclosures, even in one quarter, still.

Anthony V. Vendetti: So just a couple of quick questions here.

Peter D. Holt: So the clinics your same store sales at 13 months those are up around 3%.

Peter D. Holt: But the ones open about four years.

Peter D. Holt: Down.

Peter D. Holt: What do you think that's attributed to that.

Peter D. Holt: Sort of a leveling off.

Peter D. Holt: And then maybe just a little bit into the reasoning and.

Peter D. Holt: In general.

Peter D. Holt: For the closures I mean this quarter you had for I guess quarter last year was one.

Peter D. Holt: Do you wait to see how if the ones that are down are you looking at revenue trends and profitability or just profitability. How do you look at those in terms of in terms of the closures and then I have a couple of follow ups.

Peter D. Holt: Okay.

Speaker Change: Specifically speak to the closures that yes, we have four closings this year and that again for a system of our size nearly a thousand units foreclosures dealing in one quarter is still.

Peter D. Holt: Unbelievably low number of closures, and what's going to happen as your system matures, you've got situations where the market itself is changing, so they may lose an anchor where they've been located, or you have demographics of that market fundamentally changing, which just does not justify that clinic staying open. From time to time, you also have just some personal issues that come up that force a franchise to close a clinic, so I'm not concerned if I compare, okay, one unit closed in Q3 or Q1 2023 compared to the four closures in Q1 2024, but it's something that we look at very carefully. And certainly, the part of that question is looking at what our concern is. Is it top-line revenue? Is it the profitability of the clinic? And the answer, of course, is both.

Peter D. Holt: Unbelievably low number closer to what's going to happen is youre system matures <unk> got situations, where the market itself is changing so they may lose an anchor where they've been located or you have demographics of that market fundamentally change, which just does not justify that clinic staying open.

Peter D. Holt: Time to time, you also have just some personal issues that come up.

Peter D. Holt: For us the franchise to colon clinic so.

Peter D. Holt: I am not concerned if I compare okay. One unit closed in Q3, our Q1 2023 compared to the four closures in Q1 2024, but it's something that we look at very carefully.

Peter D. Holt: And certainly the other part of that question is looking at or.

Peter D. Holt: What is our concern as a topline revenue that profitability of the clinic and the answer of course is both that we wanted to make sure that we are continuing to look at ways to increase that profitability of that unit because what I can tell you in any system I've ever worked with and franchising.

Peter D. Holt: That we want to make sure that we are continually looking at ways to increase the profitability of that unit because, what I can tell you, in any system I've ever worked with in franchising, unit economics is one of the most important things that you have to stay focused on. And you have a couple of things you can do to influence that. One, increase revenue, and the other is to reduce costs.

Peter D. Holt: Unit Economics is one of the most important things that you have to stay focused on and you have a couple of things you can do to influence that one increase revenue and the other is to reduce costs. So those are the areas that we're focused focusing on right. Now now we know that and we've talked a lot about this in the past that when we look at the margins of our clinics is that one of the challenges we've been facing.

Peter D. Holt: So those are the areas that we're focusing on right now. Now, we know that, and we've talked a lot about this in the past, that when we look at the margins of our clinics, one of the challenges we've been facing is the increased cost of our labor, and specifically our doctors, and that's suppressed the margins. And so now we're looking at ways to increase that margin. One of the things we did on March 22 was a price increase across the board. One of the main reasons for that was to help address this issue of the increased cost of violence.

Peter D. Holt: The increased cost of our labor, specifically, our doctors and that suppressed the margin and so now we're looking at ways to increase our margin one of the things. We did in March of 'twenty. Two is do a price increase across the board.

Peter D. Holt: One of the reason the main reasons for that.

Peter D. Holt: To help address this issue of the increased costs.

Peter D. Holt: Yeah.

Peter D. Holt: We're now looking at ways to be more streamlined on the clinic experience itself and so we spent a lot of time always focusing on that new patient count, but what we're recognizing is that we can do this with our new CMO is that we can also focus on our existing patients in our last patients so with our existing patients to make sure they are staying with us longer and with our last patient.

Peter D. Holt: To make sure they come in earlier, because what we do know that average patient stays with us for roughly six months and then they drop we also see that the 25% of them on average will come back within the next six months because they are paying comes back until we feel there is some opportunities there with some of the marketing materials were having some automated marketing programs that we can influence those.

Peter D. Holt: Because what we do know, if that average patient stays with us for roughly six months, and then drops, we also see that 25% of them, on average, will come back within the next six months because their income comes back. And so we feel there are some opportunities there with some of the marketing materials we're having and some automated marketing programs that we can influence those decisions about how long our patients stay with us and how quickly they can come back.

Peter D. Holt: Those decisions about how long, our franchisee patient and stay with us.

Peter D. Holt: And how quickly they can come back.

Peter D. Holt: Okay.

Peter D. Holt: Okay, just on the 48 months, Peter, you know how many of your clinics are, you know, are four years or older? And then, in aggregate, I guess they're down 3% in terms of revenue. You know, what do you attribute that to?

Peter D. Holt: On the 48 month peer.

Peter D. Holt: How many how many of your <unk>.

Speaker Change: Clinics are.

Peter D. Holt: There are four years or older and then the in aggregate I guess theyre down 3% in terms of revenue.

Peter D. Holt: What do you attribute that to.

Peter: Well I think part of it is a maturing of the system are part of that I think are directly attributed to the new patient counts. So are the new patient counts.

Peter D. Holt: Well, I think part of it is a maturing of the system, a part of that I think I directly attribute it to the new patient count itself, or the new patient count in those more mature clinics. Yes, where they've got established, and they've got, you know, they've drawn the core of patients that are in that area. It's harder to get newer and newer patients to come into that territory or into that clinic.

Peter D. Holt: Is that in there.

Peter D. Holt: More mature clinics.

Peter D. Holt: Where they've got they have been established and they've got.

Peter D. Holt: Drawn.

Peter D. Holt: The core of patients that are in that area. It.

Jake Singleton: So I think that's one of the reasons you're seeing kind of that drop in those clinics open more than 48 months compared to a clinic that's open less than that. I think that's probably the main thing I would look at right now. I don't know. Jake, your thoughts?

Peter D. Holt: It's harder to get newer and newer patients to come in into that territory are into that into that clinic. So I think that's one of the reasons youre seeing kind of the drop in those clinics opened more than 48 months compared to a clinic that to open that.

Jake Singleton: Less than that.

Jake Singleton: I think that's probably the main thing I would look at right now I don't know Jacob.

Jake Singleton: Yes, I would say as you think about 'twenty three we did a 4% comp for the full year and the mature stores did negative one.

Jake Singleton: Okay. Yeah. I would say, you know, as you think about 23, we did a 4 percent comp for the full year, and the mature stores did a negative 1, so you had a 5 percent spread there. Because of rounding, it was a 6 percent spread here in Q1.

Jake Singleton: At a 5% spread there because of rounding it was a 6% spread here in Q1.

Jake Singleton: But I think I would just point out, you know, because we're on a fiscal calendar, March just having the Sundays with Easter, and us not rolling over, you know, what was a longstanding new patient contest and allocating those dollars to some marketing efforts in the April-May timeframe, I think had an impact on that March period in particular that drove down the comp for the quarter, but the spread was relatively close. Okay, that's helpful.

Jake Singleton: But I think I would just point to.

Jake Singleton: Because we're on a fiscal calendar.

Jake Singleton: <unk> close.

Jake Singleton: And then just last, a very big picture, obviously, we saw Starbucks come in very light in terms of sales. And, you know, they were saying that the occasional customer has not frequented Starbucks as often as they used to. Do you think the economy in general is having some negative impact on terms of, you know, getting new patients to come in the door? Or maybe just to the extent that you're able to measure that.

Jake Singleton: Okay. That's helpful. And then just lastly, very big picture, obviously, we sort of Starbucks.

Jake Singleton: Come in very light in terms of.

Jake Singleton: Sales in.

Jake Singleton: They were saying the occasional customer.

Jake Singleton: Has not frequented.

Jake Singleton: <unk> as often as they used to.

Jake Singleton: Do you think the economy in general is having some negative.

Jake Singleton: Negative impact in terms of.

Jake Singleton: Getting getting new patients to come in the door.

Jake Singleton: Maybe just.

Jake Singleton: To the extent that you are able to measure that.

Jake Singleton: Is that is that something youre seeing because you see it's not just Starbucks.

Peter D. Holt: Is that something you're seeing? Because it's not just Starbucks, you know; we're seeing that across other franchises as well this quarter. Yeah, no, no, Anthony, I think that's a real issue is that we know that, okay, if you go back to the fourth quarter, GDP growth was, I think, you know, what, 4.3%. And this quarter is still like 2.3% GDP. And so we're not in a recession, that's very clear. But you still have half the American people saying that, you know what? I personally am finding that I'm paying more at the grocery store, I'm paying more to fill up my car with gas, I'm paying more to pay my interest rate on my credit card or my mortgage, and rents are going up.

Peter D. Holt: We're seeing that across other franchise.

Peter D. Holt: As well this quarter.

Peter D. Holt: Yes, no no Anthony I think Theres, a real issue that we know that okay. If you go back to fourth quarter GDP growth I think was four 3% in this quarter is still like two 3% GDP.

Peter D. Holt: And so we're not in a recession, that's very clear, but you still have half the American people, saying that I am personally that I'm paying more of the grocery store and paying more to pick up the car with gas and pay more to pay my my interest rate on my credit card or my mortgage.

Peter D. Holt: Rents are going up and so I think that if you look at the demographics, the economic demographics of our patient base.

Peter D. Holt: And so I think that if you look at the demographics of the economic demographics of our patient base, that average income is somewhere between 50 and 105,000. And so that group is, in fact, being hit by these increasing costs and feeling more uncertain about the economy and that they are, in fact, who are our patient base. And I've talked about this before on some of the other calls, that we do think one of the factors that we've seen in our lower patient count is the fact that they feel that with that economic uncertainty, they're holding back. So they're going over-the-counter medicine before they come in and not coming in at all.

Peter D. Holt: Average income is somewhere between 50 and 105000 and so that group is in fact being hit by these increasing costs and feeling more uncertain about the economy and that they are in fact, who is our patient base and I've talked about this before on some of the other calls that we do think one of the factors that we've seen in our lower patient count. It is the fact that they are.

Peter D. Holt: Feeling that economic uncertainty, they're holding back so that there is going to over the counter medicine before they come in or not coming in at all for those who do come in they are converting at a higher rate those that do come in are staying longer the member so I think that.

Peter D. Holt: But those that do come in, they're converting at a higher rate, and those that do come in are staying longer as a member. So I think that there's still great value and importance to the service that we're offering, but I just think, in this kind of economic uncertainty, that it does impact specifically the demographics of our patients. Okay, that's very helpful. Sure, that makes sense. I'll hop back in the queue.

Peter D. Holt: There is still great value and importance of the service that we're offering but I just think in this kind of economic uncertainty.

Peter D. Holt: Does impact specifically the demographics of our patients.

Speaker Change: Are the economics Thats very helpful.

Speaker Change: Sure that makes sense I'll hop back in the queue. Thank you I appreciate it.

Peter D. Holt: Your next question comes from P. J <unk> with Craig Hallum Great.

Anthony V. Vendetti: Thank you. Appreciate it. Your next question comes from CJ Disalena with the Craig Hallam Group. Hey, everyone. I'm on behalf of Jeremy Hamblin.

CJ Disalena: Hi, everyone I'm on for Jeremy Hamblin <unk> had.

CJ DiPellina: I had a couple questions for you, and I wanted to start with the refranchising effort. Seems like you're still, you know, fairly early in the process, but just curious if you have a timeline on when we can, you know, start to see those transactions go through, and anything you can share on kind of expected deal economics would be really helpful. Sure. And we'll both answer this.

CJ DiPellina: Had a couple of questions for you I wanted to start with the Refranchising effort. It seems like you are still fairly early on the process, but just curious if you have a timeline on when we can.

Speaker Change: Start to see those transactions go through and anything you can share on kind of expected deal economics would be it would be really helpful.

Peter D. Holt: What I would say is that we're well into the process, and as I said on the call, we got a lot of interest from our franchisees. We've also opened this up to franchisees outside the joint world, and so we've been looking at hiring an investment banker who specializes in re-franchising efforts because, and I've talked about this before, this is not a fire sale. We're not just trying to get these off our books.

Peter D. Holt: These are valuable assets that we want to put them in the hands of the franchisees who can most effectively run them. I don't need to trade problems, and so we are, in fact, going through a very structured process to make sure that we're putting them in the hands of the right franchisees. But we're also looking at some of the interest that's been out, especially as we've opened this outside of the group, the joint franchisees, some very sophisticated groups who are interested in larger territories for our clinics. We've got 135 corporate clinics.

Peter D. Holt: But we're also looking at some of the some of the interest that's been out, especially as we've opened this outside of the joint franchisees system. Some very sophisticated groups, who are interested in larger territory of our clinics. We've got 135 corporate clinics, we've talked about the vast majority of being up for sale.

Peter D. Holt: We've talked about the vast majority being up for sale. So I think that we have some real opportunities to look at those transactions. And so those transactions, of course, are a little more, you know; they'll take a little more due diligence, take a little more time to put together.

Peter D. Holt: So I think that we have some real opportunities.

Peter D. Holt: Look at those transactions and so those transactions of course, they are a little more take a little more due diligence to take a little more time to put together, but what I would say is that we're certainly pleased with the interest in this refranchising effort and that from our perspective, having said always you said wed like to get this done as quickly as possible because it does take.

Peter D. Holt: The toll on continuing to run these units when they know that they're if your employer outside the four wall employ for those units.

Jake Singleton: I don't know Jay if you had anything more to add.

Jake Singleton: I think there was a part of the question there on valuation, and, you know, we are in active negotiations, so, you know, probably don't want to give too much out there, but, you know, we've done a historical look-back analysis. We were purchasers of clinics for a lot of years, and we also see all the franchisee to franchisee transfers that happen within our system because we do hold that right at first refusal. So we have a pretty good sense for the historical multiples of EBITDA that these trade for, and, you know, we'll continue to partner with the right groups that can maximize that value and generate the proceeds that these quality assets deserve.

Jake Singleton: I think there was a part of the question there on on valuation and we are in active negotiations so.

Jake Singleton: Probably don't want to give too much out there, but we've done a historical look back analysis, we were purchasers of clinics for a lot of years and.

Jake Singleton: We will continue to partner with the right groups that can maximize that value and generate the proceeds that these quality assets deserve.

Speaker Change: Okay understood. Thank you.

Jake Singleton: Okay, understood. Thank you. And then moving on to the P&L, general and administrative expenses were up year over year on an absolute basis. Just curious how you guys are thinking about G&A moving forward and if we should expect some more absolute increases year over year. Yeah, I think, you know, Q1 last year was 20.3 million or 20 million. I think it was 20.3 million for this quarter.

Jake Singleton: And then moving on to the P&L looks like.

Jake Singleton: General and administrative.

Jake Singleton: Up year over year on an absolute basis, just curious how you guys are thinking about G&A moving forward and if we should expect some more.

Jake Singleton: More absolute increases year over year.

Jake Singleton: Yes, I think Q1 last year was $23 million or $20 million I think it was $20 3 million for this quarter so up slightly.

Jake Singleton: We did have some accounting and legal and professional service costs associated with some of the Refranchising effort.

Jake Singleton: We do have a year's worth of additional head count that's that's rolling over.

Jake Singleton: 100, plus unit increased base.

Jake Singleton: I think the critical piece of that question is we understand that for the Refranchising strategy to work we have to be critically focused on on cutting the necessary G&A to reach those profitability targets that we have.

Jake Singleton: So that'll be something that we consistently monitor. You know, as you gleaned from the call, we have not executed a ton of those deals yet through March 31. And you'll expect to see that GNA begin to taper, you know, as we continue our progress through that refranchising effort. So it'll really be dependent on when the refranchising transactions occur, how large they are, and then we'll be able to shed the associated GNA, but that will be a critical focus of management as we continue this process.

Jake Singleton: So that'll be something that we consistently monitor as you gleaned from the call. We have not executed through March 31, a ton of those deals yet and Youll expect to see that G&A begin to taper as we continue our progress through that Refranchising effort.

Jake Singleton: So it will really be dependent on.

Jake Singleton: When the Refranchising transactions, how large they are.

Jake Singleton: And then we'll be able to shed the associated G&A, but that will be a critical focus of management as we continue this process.

Speaker Change: Okay cool. Thank you and then one more.

Jake Singleton: Okay, cool. Thank you. And then there was one more. So the FAST Act came into place about a month ago. Curious, you know, especially with the California stores, if you've seen any attritional labor of, you know, maybe some of the lower paying jobs going, you know, and finding, finding workouts where, Yeah, I think, from our perspective, you know, that had been, you know, rumored for a long time. So I think we have started to see the wage pressures on that, you know, certainly before the bill was officially executed.

Jake Singleton: So the fast act came into place about a month ago, I'm curious, especially with the California stores curious.

Jake Singleton: You have seen any attrition of labor of maybe some of the lower paying jobs going.

Jake Singleton: On funding funding workouts with.

Jake Singleton: Yes, I think I think from our perspective.

Jake Singleton: Sure.

Jake Singleton: That had been rumored for a long time, so I think we start to see we started to see the wage pressures on that certainly before the bill was officially executed.

Jake Singleton: We haven't seen an uptick in turnover as it relates to our roles, and knowing that they now have kind of a competitive benchmark out there for some other QSR-type concepts, something that we'll continue to monitor, but we haven't really felt a direct and immediate impact so far as it relates to our wage levels because I think we had largely absorbed a lot of that pressure kind of leading up to the actual finalization And certainly, it's impacting the market, but specifically the QSR.

Jake Singleton: We haven't seen really an uptick in turnover as it relates to our roles.

Jake Singleton: And knowing that they now have kind of a competitive benchmark out there for some other <unk> type concepts something that we'll continue to monitor, but we havent really felt a direct and immediate impact so far as it relates to our our wage levels. Because I think we had largely absorbed a lot of that pressure kind of leading up to the actual finalization.

Jake Singleton: And certainly it's impacting the market but.

Jake Singleton: Now specifically to <unk>.

Jake Singleton: Yes.

Speaker Change: Alright, Okay. Thank you I'll hop back in the queue.

Jake Singleton: Right. Okay. Thank you. I'll hop back in the queue.

Peter D. Holt: That does conclude our question and answer session. I would like to turn the conference back over to Peter for any closing remarks. Thank you, Kelly, and thank you all for attending the call. Today, I'd like to share a note from our VP of chiropractic and compliance that he received from a prior student who went through a preceptorship program at the Joint and is now a full-time employee. And I'm quoting: My preceptorship with the Joint Chiropractic was an enriching experience that provided me with invaluable hands-on practice and deepened my understanding of patient care.

Jake Singleton: It does conclude our question and answer session I would like to hand, the conference back over to Peter for any closing remarks.

Peter: Thank you Carrie and thank you all for attending the call today I'd like to share a note from our VP of car Practic care in compliance. He had received from our prior student who went through a preceptorship program at the joined and is now a full time employee.

Peter D. Holt: The mentorship I received was top-notch, with so many different doctors providing helpful input into my technique and flow. The opportunity to work with a diverse patient population allowed me to hone my adjusting skills and tailor my treatment plans to individual needs. This preceptorship bolstered my confidence in my chiropractic abilities and reinforced my commitment to this healing profession.

Peter D. Holt: <unk> plans to individual needs. This preceptorship bolstered my confidence in my car Practic abilities and reinforce my commitment to this helium profession and we're so pleased to have had that Dr. <unk> joined our team.

Peter D. Holt: Thank you stay well adjusted.

Speaker Change: That does conclude our conference for today. Thank you for participating you may now disconnect.

unknown: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.

Q1 2024 The Joint Corp Earnings Call

Request a DemoDemo

JYNT

The Joint

Earnings